PRESENTATION TO THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF SUN REGARDING
PROJECT SUN
MAY 19, 2000
TABLE OF CONTENTS
SECTION
- - - - --------------------------------------------------------------------------------
1 Review of Proposed Transaction
2 Work Completed to Date
3 Overview of Sun Stock
4 Valuation
A Methodology
B Sun Consolidated Financials
C Summary Valuation
5 Sun Business Segment Review and Analysis
A Mainland Residential Segment
B Hawaii Residential Segment
C Mainland Commercial Segment
D Hawaii Commercial Segment
E Lana'i Segment
6 Financial Conditions of the Flexi-Van Offer
- - - - --------------------------------------------------------------------------------
CONFIDENTAL
TABLE OF CONTENTS
SECTION
- - - - --------------------------------------------------------------------------------
APPENDICES
A Property List
B Weighted Average Cost of Capital
C Review of Discussions with Other Potential Buyers
D Real Estate Appraisal Letter
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
CONFIDENTAL
SECTION 1
REVIEW OF PROPOSED TRANSACTION
SUMMARY OF THE PROPOSED TRANSACTION
KEY TERMS(1)
/ / Flexi-Van(2) will purchase all remaining outstanding shares of common stock
for $18.50 per share (the "Proposed Transaction")
- Flexi-Van's current beneficial ownership is approximately 27.1%
- Flexi-Van will purchase remaining 72.9% of common shares
- Enterprise Value of $602.0 million
- Flexi-Van will own 100% of company immediately following the
transaction
/ / Form of Offer
- Cash tender offer
- Minimum number of shares is a majority of the non-Flexi-Van shares;
such provision can be waived after discussion with the Special
Committee
- Upon closing of the tender offer, parties will complete a merger in a
timely manner
- Shareholders have dissenter rights under Hawaiian law
/ / Break-up Provisions
- Board has the right to consider and accept a higher offer should one
emerge
- Can provide non-public information to potential higher bidders
- Must pay Flexi-Van a break-up fee of the greater of $6.8 million or 2%
of the equity value the if merger agreement is terminated in favor of
another offer
- Limited ability to solicit other acquisition proposals
- - - - --------------------------------------------------------------------------------
CONFIDENTAL 1
SUMMARY OF THE PROPOSED TRANSACTION (CONTINUED)
/ / Significant Conditions to Closing
- Financing contingency
- HSR clearance
- Minimum amount to be tendered
/ / Deutsche Bank Securities, Inc. ("DBSI") issued a highly confident letter on
March 29, 2000
- "Taking into account [certain] matters and assumptions, DBSI is highly
confident of its ability to arrange, place or underwrite the financing
required for Flexi-Van to consummate the Transaction"
- Key Assumptions of DBSI's letter:
- No material adverse change in general economic conditions,
capital market conditions, the operations, business, prospects,
condition (financial and other) or management of the Company
- Satisfactory completion of due diligence
/ / DBSI has provided a draft commitment letter dated May 19, 2000 to fund the
transaction.
- - - - -----------------
(1) Per the proposal letter dated March 29, 2000 delivered by David H. Murdock,
Chairman and Chief Executive Officer of Flexi-Van Leasing, Inc.
(2) Flexi-Van or another corporation wholly-owned by David Murdock.
- - - - --------------------------------------------------------------------------------
CONFIDENTAL 2
POST-ANNOUNCEMENT DISCLOSED TRADING ACTIVITY(1)
TISCH FAMILY INVESTMENT
/ / Acquiring Entities: Mentor Partners, L.P.; Mentor Offshore Fund Limited;
and Four Partners
/ / Beneficial Owners: Daniel, Thomas, Andrew and James Tisch
/ / Schedule 13D filing April 28, 2000
/ / Purchased 9.6 % from March 31, 2000 to April 28, 2000 at an average price
of $17.165 per share
TWEEDY BROWNE
/ / Sold 611,169 shares from February 14, 2000 to April 3, 2000, per a Schedule
13D filed April 11, 2000
/ / Currently beneficially holds a remaining 1.2% of the shares per the
Schedule 13D, down from 6.8%
- - - - ------------------------
(1) Per public filings.
- - - - --------------------------------------------------------------------------------
CONFIDENTAL 3
PROPOSED TRANSACTION VALUE
PROPOSED TRANSACTION VALUE (DATA IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
- - - - --------------------------------------------------------------------------------
Price per Share(1) $18.50
Fully Diluted Shares Outstanding(2) 17.794
---------
Value of Fully Diluted Shares $329.2
Cost of Option Shares Exercise Proceeds(3) (11.3)
---------
Total Common Equity Value $317.9
Plus: Debt(4) 274.5
Plus: Specific Deferred Taxes(5) 5.0
Plus: Other Liabilities(6) 10.3
Less: Cash(4) (5.7)
---------
Total Transaction Enterprise Value $602.0
=========
- - - - --------------------------------------------------------------------------------
- - - - ---------------------
(1) Represents revised price per share offered by Flexi-Van.
(2) 17,052,946 shares outstanding plus 741,271 shares issuable pursuant to
option exercises, per Company 10-K dated March 31, 2000.
(3) Based on 741,271 options outstanding at an average exercise price of
$15.18, per Company Annual Report dated December 31, 1999 (includes
management options).
(4) As of February 29, 2000 per Sun Board Presentation dated March 29, 2000.
(5) Represents management's estimate of excess of cash taxes over GAAP tax
expense the Company will incur for the period 2000-2004. Management
believes that there will be no material increase or decrease in the
deferred tax liability beyond 2004. Book value of deferred tax is $180.8
million, as of February 29, 2000, per Sun Board presentation dated March
29, 2000.
(6) Consists of property taxes payable, interest payable, and Mountaingate
landfill reserve of $1 million, $1.7 million, and $7.6 million,
respectively.
- - - - --------------------------------------------------------------------------------
CONFIDENTAL 4
SECTION 2
WORK COMPLETED TO DATE
WORK COMPLETED TO DATE
/ / Reviewed annual reports, quarterly report(s), and other public filings of
Sun ("Sun" or the "Company")
/ / Reviewed certain operating and financial information, including and
projections and appraisals (when available) provided to us by management
for the five years ended December 31, 2004
- After discussions with the Special Committee, Bear Stearns obtained
limited real estate appraisals from The Hallstrom Group Inc. for real
property owned by the Company and located the Island of Lana'i, and
certain real property owned by the Company and located on Oahu
/ / Met with certain members of Sun's senior management to discuss Sun's
business, operations, historical and projected financial results and future
prospects
- Including discussions with David Murdock and select business segment
managers
/ / Performed selected site visits
/ / Reviewed historical prices and events, trading multiples and trading
volume(s) of the common shares of Sun
/ / Performed discounted cash flow analysis based on the projections for Sun
furnished to us by Sun management
/ / Reviewed publicly available financial data, stock market performance data
and trading multiples of companies in similar business segments to Sun and
its components, I.E., Lodging Companies, Homebuilding/Land Development
Companies and Commercial Property Owners/Operators
/ / Reviewed the terms of recent merger and acquisition transactions in similar
business segments to Sun and its components
CONFIDENTIAL 5
WORK COMPLETED TO DATE (CONT.)
/ / Held preliminary discussions with potential competitive bidders
/ / Conducted such other studies, analyses, inquiries and investigations as we
deemed appropriate
/ / Bear Stearns is not a real estate appraisal firm, and our engagement does
not contemplate any appraisals of real estate. In addition, we have relied
upon and assumed without independent verification the accuracy,
completeness and conclusions of such appraisals, financial and other
information provided by Sun. However, we obtained limited real estate
appraisals from The Hallstrom Group Inc. for real property owned by the
Company and located the Island of Lana'i, and certain real property owned
by the Company and located on Oahu
CONFIDENTIAL 6
SECTION 3
OVERVIEW OF SUN STOCK
OVERVIEW OF SUN STOCK
/ / Sun has a number of positive attributes which make it an attractive
investment
- Large land holdings, particularly in Hawaii
- Good record of master plan development
- Attractive commercial real estate properties
- Experienced management
/ / However Sun has attributes which detract from its attractiveness as an
investment
- Long-dated assets, with uncertain economic potential
- Ongoing capital investment required to realize asset potential
- No earnings/cash flow visibility
- Cyclical business
- Low liquidity, little Wall Street coverage
- Not a pure play in a sector
- Sectors out of favor with investors
CONFIDENTIAL 7
SUN MAJOR EVENTS--SINCE SPIN-OFF ON DECEMBER 29, 1995
- - - - ---------------------------------------------------------------------------------------------------------------------------------
[GRAPH]
- - - - ---------------------------------------------------------------------------------------------------------------------------------
- - - - ------ 12/28/95:Dole transferred its real estate and resort ------ 07/26/99 Sun announced a June 1999 three
A business to Sun, distributing to shareholders G month earning per share of $0.23 vs.
- - - - ------ one share of Sun common stock for every three ------ $0.13 during the same period one
of Dole. Sun stock began trading shares on the year earlier.
NYSE, closing at $18 per share.
- - - - ------ 07/26/96 Sun announced June 1996 three month earnings ------ 02/07/00 Sun announced annual earnings per
B per share of $0.10 vs.$0.21 for same period H share of $0.79 vs. $0.58 during the
- - - - ------ one year earlier. ------ same period one year earlier: Sutro
analyst upgrade to "BUY".
- - - - ------ 07/28/97 Sun announced June 1997 three month earnings ------ 03/29/00 David Murdock submitted a proposal
C per share of $0.01 vs. $0.10 for same period I to acquire all remaining outstanding
- - - - ------ one year earlier. ------ shares of Sun stock not held by Mr.
Murdock of affiliates at $17.00 per
share.
- - - - ------ 05/11/98 Sun sets Dutch Auction for up to 3,000,000 ------ 04/28/00 Schedule 13D joint filing by Daniel
D shares at $17.75 to $19.50 price range. J R. Tisch, Thomas J. Tisch, Andrew H.
- - - - ------ ------ Tisch, and James S. Tisch disclosing
increase in beneficial owners'
holdings to 9.6%
- - - - ------ 06/30/98 Sun announced that it will purchase 3,015,764 ------ 05/01/00 Sun report Q1 2000 earnings of $0.33
E common shares at $19.25 each in accordance with K per share or $5.7M net income vs.
- - - - ------ terms of the Dutch Auction tender offer, which ------ $0.16 per share or $2.8M net income
expired June 19. for the same period one year
earlier.
- - - - ------ 10/27/98 Sun announced September 1998 three month earnings
F per share of $0.24 vs. loss, $0.03, during the
- - - - ------ same period one year earlier.
- - - - ---------------------------------------------------------------------------------------------------------------------------------
- - - - -----------------
Source of Price/Volume information: FactSet Research Systems.
CONFIDENTIAL 8
HISTORICAL RELATIVE PRICE ANALYSIS
SUN'S STOCK HAS UNDER PERFORMED ALL OF ITS COMPARABLE COMPANIES SINCE GOING
PUBLIC
DECEMBER 29, 1995 TO MAY 12, 2000
================================================================================
[GRAPH]
================================================================================
Source: FactSet Research Systems. Excludes effect of dividends.
(1) Index consists of AVTR, BZH, CDX, SHLR, CTX, DHI, KBH, LEN, NHL, PHM, SPF,
TOL, and WBB.
(2) Index consists of BDN, CLI, BDN, CLI, CTA, HIW, KE, KIM, KRT, KTR, OFC,
PGE, PKY, PNP, and PSB.
(3) Index consists of CHH, FS, HLT, HOT, MAR, and PDQ.
(4) Morgan Stanley REIT Index tables takes into account reinvestment of
dividends.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 9
PRICE INCREMENTS AT WHICH SUN SHARES TRADED PRIOR TO TRANSACTION ANNOUNCEMENT(1)
PRIOR 1 YEAR
================================================================================
[GRAPH]
- - - - --------------------------------------------------------------------------------
- - - - -----------------
Source: FactSet Research Systems.
(1) Transaction announced on March 29, 2000; closing price on March 28 was
$12.25.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 10
TRADING VOLUME RANGE BY DAYS PRIOR TO TRANSACTION ANNOUNCEMENTS (1)
PRIOR 1 YEAR
================================================================================
[GRAPH]
- - - - --------------------------------------------------------------------------------
- - - - ----------------
Source: FactSet Research Systems.
(1) Transaction announced on March 29, 2000; closing price on March 28 was
$12.25.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 11
SUN OWNERSHIP PROFILE
SUN COMMON STOCK
======================================================================================================
NUMBER OF COMMON
INSIDERS SHARES HELD % OWNERSHIP
----------------------- ------------------------------
David H. Murdock(1) 4,616,977 27.1%
Other Directors and Executive Officers(1)(2) 228,174 1.3%
----------------------- ------------------------------
Total 4,845,151 28.4%
5% HOLDERS(3)
Franklin Resources, Inc.(4) 1,700,000 10.0%
Dimensional Fund Advisors, Inc.(4) 1,187,900 7.0%
Ingalls & Snyder LLC(4) 1,081,033 6.3%
Tisch Family(5) 1,637,300 9.6%
----------------------- ------------------------------
Total 5,606,233 32.9%
OTHER STOCKHOLDERS 6,601,562 38.7%
----------------------- ------------------------------
TOTAL OUTSTANDING SHARES: 17,052,946 100.0%
======================= ==============================
- - - - ------------------------------------------------------------------------------------------------------
- - - - -------------------
(1) As of March 16, 2000 from Proxy Statement filed March 31, 2000. Excludes
effect of Mr. Murdock's exercise of 26,956 options exercisable within 60
days of March 29, 2000.
(2) Includes 10 members of Board of Directors and Executives excluding Mr.
Murdock.
(3) Tweedy Browne, a 6.8% holder as of March 31, 2000 currently owns 1.2% per a
Schedule 13D filed on April 11, 2000.
(4) Source: CDA Spectrum data as of April 24, 2000.
(5) Data from Schedule 13D joint filing by Daniel R. Tisch, Thomas J. Tisch,
Andrew H. Tisch and James S. Tisch, filed April 28, 2000.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 12
WALL STREET COMMENTARY ON SUN STOCK
SUN HAS VERY LIMITED WALL STREET RESEARCH COVERAGE. CURRENTLY, ONLY SUTRO & CO.
REPORTS ON THE COMPANY.
========================================================================================
DATE ANALYST/FIRM RECOMMENDATION EPS/GROWTH ESTIMATE
- - - - ------------ ------------------------------ ------------------ -------------------------
3/30/00 Craig M. Silvers Hold Rating/ No change
Sutro & Co. Lowered from Buy
3/29/00 Craig M. Silvers Buy Rating No change
Sutro p& Co.
2/7/00 Craig M. Silvers Buy Rating EPS estimate increase
Sutro & Co. from $0.74 to $0.78 for
FY00
8/26/99 Craig M. Silvers Buy Rating EPS estimate for FY99
Sutro & Co. and FY00 is $0.62 and
$0.74 respectively
2/5/99 Craig M. Silvers Buy Rating EPS estimate for FY99
Sutro & Co. increase from $0.42 to
$0.53
7/28/97 Craig M. Silvers Buy Rating EPS estimate for FY97:
Sutro & Co. $0.07; estimate for
FY98: $0.39
- - - - ----------------------------------------------------------------------------------------
========================================================================================
PRICE
DATE TARGET/TERM COMMENTS
- - - - ------------ ------------------------- -----------------------------------------------
3/30/00 No change - Company received a buyout bid from Flexi-Van
Leasing for $17 a share; expecting a higher
bid from Flexi-Van. Definitive agreement must
be executed by May 15, 2000 or proposal will
be terminated.
3/29/00 No change - San Miguel Corp., a Philippine food and
beverage company wants to invest up to $1B to
acquire a stake in Dole Food Co; transaction
could have implications for sale of CCS by
Murdock or Murdock taking CCS private.
2/7/00 12-month price - Company reported 4Q99 EPS of $0.15 which beats
objective of the estimate of $0.10; Hawaiian economy
$23; NAV showing signs of recovery; stock is trading
estimated at at a discount to NAV estimate of $29.00.
$29.00
8/26/99 Price objective - NAV estimate of $29.50 assumes full book value
unchanged; NAV of $241M for Lana'i, or $14.15 per share.
estimated at See pp. 71-72 herein.
$29.50
2/5/99 12-month price - Company reported 4Q98 EPS of $0.16, or double
objective of earnings estimates and greater than earnings
$23; NAV of $0.04 for 4Q97. Home prices in Hawaii
estimated climbing.
at $32-$34 per
share
7/28/97 18-month price - Company has formed partnership with Golden
objective of Bear International to develop master-planned
$25; NAV communities with Jack Nicklaus signature golf
estimated at $29 courses; Hawaiian economy expected to join
the national expansion.
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 13
SECTION 4
VALUATION
SECTION 4-A
METHODOLOGY
METHODOLOGY
WE HAVE EMPLOYED SEVERAL METHODS TO DERIVE A RANGE OF VALUES FOR THE COMPANY.
HOWEVER, NOT ALL METHODS HAVE BEEN APPLIED TO EACH BUSINESS SEGMENT
- - - - - Transaction Multiples and Premia
- - - - - Discounted Cash Flow Analysis
- - - - - Comparable Company Analysis
- - - - - Precedent Merger and Acquisition Transactions Analysis
- - - - - Third Party Real Estate Appraisals in Select Instances
- - - - - Capitalization of Stabilized Cash Flows
THE FOLLOWING PAGES HEREIN MORE FULLY DESCRIBE THE METHODS USED AND CONCLUSIONS
ATTAINED
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 14
METHODOLOGY - DISCOUNTED CASH FLOW
- - - - - Performed a sum-of-the-parts valuation
- Valued separately each of the five operating segments
- Mainland Residential
- Hawaii Residential
- Mainland Commercial
- Hawaii Commercial
- Lana'i Resort
- Valued unallocated corporate overhead separately
- - - - - Analyzed Company projections for 2000 to 2004
- Performed sensitivity analysis based on Management projections
- - - - - Discounted unleveraged after-tax free cash flows
- - - - - Calculated terminal value after 5 years using terminal multiple
methodology
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 15
METHODOLOGY - DISCOUNTED CASH FLOW (CONT.)
- - - - - Used ranges of discount rates as weighted average cost of capital (WACC)
based on each respective segment's risk profile
- Using the Capital Asset Pricing Model (CAPM), the cost of equity for
homebuilders ranges from 8.1% to 14.6%. However, over the past
several years, homebuilders have significantly underperformed the
market and have had very low betas. Therefore, Bear Stearns
calculated Sun's cost of equity, assuming a market beta, of 17.4%
and WACC of 12.0%
- Bear Stearns estimated the average cost of fixed rate debt to be 9%
assuming refinancing of all of Sun's debt
- Based upon this analysis, management's investment hurdle rates, and
Bear Stearns' knowledge of real estate opportunity fund investors
who expect pretax equity returns of 25%+, we used the following
discount rates in our analysis:
========================================================================
DISCOUNT RATE
SUN SEGMENTS RANGES
- - - - ------------------------------------------------------ -----------------
Mainland Residential Segment 12.0% - 14.0%
Hawaii Residential Segment 12.0% - 14.0%
Mainland Commercial Segment 10.0% - 12.0%
Hawaii Commercial Segment 11.0% - 13.0%
Lana'i Resort Segment 11.0% - 13.0%
- - - - ------------------------------------------------------ -----------------
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 16
- - - - -------------------------------------------------------------------------------
METHODOLOGY - COMPARABLE COMPANY ANALYSIS
- Developed three separate sets of public companies comparable to Sun after
reviewing the following factors, among others:
- Business comparability and market segmentation
- Relative size of market capitalization/liquidity
- Growth parameters
- Other relevant business and financial characteristics
- The three sets of comparable companies include:
- Residential Segment: Homebuilders and developers
- Commercial Segment: Office and Retail
- Resorts: Lodging companies
- Examined various valuation multiples, including: Enterprise Value/Sales,
Enterprise Value/EBITDA, Enterprise Value/EBIT, P/E, Funds From Operations
("FFO")/Share and Price/Book
- Source of earnings forecasts for comparable companies are consensus Wall
Street estimates
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 17
- - - - -------------------------------------------------------------------------------
METHODOLOGY - M&A COMPARABLE TRANSACTIONS
- We analyzed the terms and valuation multiples of over 35 M&A transactions
in the Homebuilders/Timeshare, REIT and Lodging sector
- Limited public disclosure on certain transactions
- We also analyzed acquisitions of large land holdings which were purchased
by governmental or environmental groups without a view toward earning any
financial return on such acquisitions
- Land was purchased to preserve its natural state
- Examined various transaction multiples, including: Enterprise
Value/EBITDA, Enterprise Value/EBIT, Equity Value/Net Income and Equity
Value/FFO
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 18
- - - - -------------------------------------------------------------------------------
METHODOLOGY - CAPITALIZATION RATES
- For commercial real estate that is fully leased, valuations can be derived
by taking the stabilized adjusted Net Operating Income and dividing it by
a capitalization rate
- Capitalization rates are market dependent and discussed in the commercial
real estate sections of this presentation
- Capitalization rate valuation methodologies can be applied only to those
properties with stabilized cash flow
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 19
- - - - -------------------------------------------------------------------------------
METHODOLOGY - REAL ESTATE APPRAISAL
- We reviewed the Company's previously obtained commercial real estate
appraisals
- Given the unique nature of Lana'i, large land inventories on Oahu, and
after discussions with the Special Committee, we obtained limited
appraisals on these assets from The Hallstrom Group, one of the leading
real estate appraisal firms in Hawaii
- The results of this appraisal are discussed in the Lana'i and Hawaii
Residential sections of this presentation
- See Appendix D for the Appraisal Letter
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 20
- - - - -------------------------------------------------------------------------------
METHODOLOGY - APPLICATION OF VARIOUS METHODOLOGIES
- Each methodology does not necessarily produce a similar valuation for the
same asset or business. Indeed sometimes, their results can be highly
divergent
- Each methodology (including their discount rates, capitalization rates and
terminal multiples) has been considered based on the unique
characteristics of the particular asset or business relative to the
particular valuation methodology
- Best judgment has been applied, considering all factors and valuation
methodologies, in deriving an appropriate valuation range for the asset or
business
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 21
SECTION 4-B
SUN CONSOLIDATED FINANCIALS
- - - - -------------------------------------------------------------------------------
OVERVIEW
IN ANALYZING SUN, WE SEPARATED THE BUSINESSES INTO FIVE PRIMARY BUSINESS
SEGMENTS
-------------------------------------------------------------------------------
- Mainland Residential Segment - Hawaii Commercial Segment
- Property in California, Arizona and Florida - Office buildings
- Developed and undeveloped land - Retail
- Hawaii Residential Segment - Agricultural and conservation land
- Property on the island of Oahu - Undeveloped land
- Developed and undeveloped land
- Mainland Commercial Segment - Lana'i
- Property in California, Georgia, North Carolina, - Two resorts and two golf courses
Arizona and Florida
- Office - Residential development
- Retail - Unentitled agricultural and conservation land
- Industrial - Substantial portion of the land difficult to
entitle and develop
- Landfill
- Undeveloped Land
-------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 22
- - - - -------------------------------------------------------------------------------
CONSOLIDATED HISTORICAL AND PROJECTED FINANCIAL RESULTS(1)
REVENUES ($ IN MILLIONS) EBITDA ($ IN MILLIONS)
- - - - ------------------------------------------------------------ ---------------------------------------------------------
[GRAPH] [GRAPH]
- - - - ------------------------------------------------------------ ---------------------------------------------------------
UNLEVERAGED FREE CASH FLOW(2) ($ IN MILLIONS) DEVELOPMENT & CAPITAL EXPENDITURES ($ IN MILLIONS)
- - - - ------------------------------------------------------------ ---------------------------------------------------------
[GRAPH] [GRAPH]
- - - - ------------------------------------------------------------ ---------------------------------------------------------
- - - - ----------------
(1) Source: Sun Form 10-Ks for each year ending December 31, 1997, 1998, and
1999 and Sun Management's projections, prepared in October 1999. 1999 data
for unleveraged free cash flow and development and capital expenditures is
estimated, since Management does not update its model until the next year's
projections are prepared.
(2) Assumes tax rate of 36%.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 23
SECTION 4-C
SUMMARY VALUATION
SUMMARY VALUATION
- - - - -------------------------------------------------------------------------------
($ IN MILLIONS)
- - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------- --------------------------- --------------------------------------------------------
ENTERPRISE VALUE VALUE PER SHARE (1)
------------------------------------------ ------------------------------------------
LOW MID HIGH LOW MID HIGH
------------- ------------ ------------- ------------- ------------ -------------
Mainland Residential $100 $115 $130 $5.62 $6.46 $7.31
Hawaii Residential 155 180 205 8.71 10.12 11.52
Mainland Commercial 210 222 235 11.80 12.48 13.21
Hawaii Commercial 110 115 120 6.18 6.46 6.74
------------- ------------ ------------- ------------- ------------ -------------
Subtotal $575 $632 $690 $32.31 $35.52 $38.78
Corporate Overhead(2) (50) (40) (30) (2.81) (2.25) (1.69)
------------- ------------ ------------- ------------- ------------ -------------
Enterprise Value Excluding Lana'i $525 $592 $660 29.50 33.27 37.09
Less: Net Debt and Other Liabilities (273) (273) (273) (15.33) (15.33) (15.33)
------------- ------------ ------------- ------------- ------------ -------------
Equity Value Excluding Lana'i $252 $319 $387 $14.17 $17.94 $21.76
Island of Lana'i (3) 60 110 160 (4) 3.37 6.18 8.99 (4)
------------- ------------ ------------- ------------- ------------ -------------
Equity Value $312 $429 $547 $17.54 $24.12 $30.75
- - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - -----------------
(1) Assumes 17,794,217 fully diluted shares outstanding.
(2) Low case scenario represents the full cost of Sun's corporate overhead;
base and high represent varying degrees of potential synergies w/
Flexi-Van.
(3) High valuation of $160 million from Real Estate Appraisal.
(4) The "High Values" do not account for the possibility of non-economic
transaction. See page 78.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 24
PUBLIC SHAREHOLDER VALUATION ANALYSIS
THE FOLLOWING ANALYSIS ASSUMES THAT THE COMPANY ACHIEVES IT LONG-TERM FORECAST
AND CAN ACHIEVE A 7.5x-8.5x EBITDA MULTIPLE
- - - - ----------------------------------------------------------------------------------------------------------------------------------
2002 2003 2004
--------------------------- ------------------------- -----------------------------
EBITDA MULTIPLE 7.5x 8.5x 7.5x 8.5x 7.5x 8.5x
------------- ------------- ------------ ------------ ------------- ---------------
Projected EBITDA For Year ending 12/31(1) $ 76.5 $ 76.5 $ 83.3 $ 83.3 $ 87.1 $ 87.1
Enterprise Value $ 573.8 $ 649.9 $ 624.8 $ 708.2 $ 653.3 $ 740.4
Less: Debt(1) (222.3) (222.3) (131.3) (131.3) - -
Less: Deferred Taxes(2) (3.0) (3.0) (2.0) (2.0) (1.0) (1.0)
Less: Other Liabilities(3) (10.3) (10.3) (10.3) (10.3) (10.3) (10.3)
Plus: Cash(4) 17.0 17.0 17.0 17.0 25.2 25.2
------------- ------------- ------------ ------------ ------------- ---------------
Equity Value $ 355.2 $ 431.3 $ 498.2 $ 581.6 $ 667.2 $ 754.3
Shares outstanding 17.794 17.794 17.794 17.794 17.794 17.794
Equity Value per share $ 19.96 $ 24.24 $ 28.00 $ 32.69 $ 37.49 $ 42.39
DISCOUNTED PUBLIC SHAREHOLDER EQUITY VALUE PER SHARE
11.0% Discount Rate $ 16.20 $ 19.67 $ 20.47 $ 23.90 $ 24.70 $ 27.92
12.0% Discount Rate 15.90 19.32 19.93 23.27 23.83 26.94
13.0% Discount Rate 15.63 18.98 19.41 22.65 23.00 26.00
14.0% Discount Rate 15.36 18.65 18.90 22.06 22.20 25.10
- - - - ----------------------------------------------------------------------------------------------------------------------------------
- - - - ---------------
(1) Based on Company Management projections.
(2) Assumes Deferred Taxes are reduced by $1 million/year.
(3) Assumes Other Liabilities remain constant.
(4) Includes $11.3 million in cash from options exercised and assumes cash
remains constant until debt is repaid in 2004.
CONFIDENTIAL 25
TRANSACTION MULTIPLES
- - - - -----------------------------------------------------------------------------------------------------------
PRE-
ANNOUNCEMENT INITIAL OFFER REVISED OFFER
---------------- --------------- ---------------
Price per Share $12.25(1) $17.00 $18.50
---------------- --------------- ---------------
Fully Diluted Shares Outstanding(2) 17.053 17.132 17.186
Total Equity Value $208.9 $291.2 $317.9
Total Enterprise Value(3) $493.0 $575.3 $602.0
ENTERPRISE VALUE / REVENUE(4)
1999 $309.5 1.6x 1.9x 1.9x
2000 370.4 1.3x 1.6x 1.6x
2001 407.7 1.2x 1.4x 1.5x
ENTERPRISE VALUE / EBITDA(4)
1999 $48.0 10.3x 12.0x 12.5x
2000 59.0 8.4x 9.8x 10.2x
2001 66.3 7.4x 8.7x 9.1x
ENTERPRISE VALUE / EBIT(4)
1999 $29.0 17.0x 19.9x 20.8x
2000 37.8 13.0x 15.2x 15.9x
2001 44.1 11.2x 13.0x 13.6x
PRICE / EARNINGS(4)
1999 0.91 13.5x 18.7x 20.3x
2000 1.29 9.5x 13.2x 14.3x
2001 1.87 6.6x 9.1x 9.9x
- - - - -----------------------------------------------------------------------------------------------------------
- - - - -----------------
(1) As of March 28, 2000, one day prior to the announcement of the Proposed
Transaction.
(2) Based on 17,052,946 shares outstanding and 741,271 options outstanding,
with an exercise price of $15.18, using the Treasury method.
(3) Total Enterprise Value is calculated as total value of equity plus net debt
and certain other liabilities of Sun, at the indicated prices per share.
(4) Estimated data per Sun Management projections.
CONFIDENTIAL 26
TRANSACTION PREMIA AS OF MARCH 29, 2000(1)
- - - - ----------------------------------------------------------------------------------------------------------------------------
INITIAL OFFER PREMIUM (2) REVISED OFFER PREMIUM (3)
--------------------------- ---------------------------
One-Day Prior 38.8% 51.0%
One-Month Prior 33.3% 45.1%
20 Trading Days Average Prior 32.7% 44.4%
One-Year Average (4) 20.1% 30.7%
52-Week High (4) (5) (4.2%) 4.2%
52-Week Low (4) (6) 43.9% 56.6%
- - - - ----------------------------------------------------------------------------------------------------------------------------
- - - - -------------
(1) Date Proposed Transaction was announced.
(2) Based on an initial offer price of $17.00
(3) Based on a revised offer price of $18.50
(4) For the period of March 28, 1999 to March 28, 2000.
(5) High was $17.75 on July 1, 1999.
(6) Low was $11.81 on February 1, 2000.
CONFIDENTIAL 27
STOCK PREMIUM ANALYSIS PRIOR TO TRANSACTION ANNOUNCEMENT
-----------------------------------------------------------------------------
GOING PRIVATE TRANSACTION(1)
----------------------------------
Number of Transactions 30
TOTAL PREMIUM PAID(2)
High 81.9%
Low (3.3)
Median 27.5
Mean 31.7
-----------------------------------------------------------------------------
Sun Transaction(2) 44.4%
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
- - - - ----------------
(1) Source: Securities Data Company for US completed going-private, all-cash
consideration transactions with a transaction value over $100 million for
the period January 1, 1998 to April 24, 2000.
(2) Based on 20-day trading average, one day before announcement.
CONFIDENTIAL 28
SECTION 5
SUN BUSINESS SEGMENT REVIEW AND ANALYSIS
SECTION 5-A
MAINLAND RESIDENTIAL SEGMENT
MAINLAND RESIDENTIAL SEGMENT - OVERVIEW
/ / Significant amount of undeveloped and unentitled landholdings should
provide inventory for next seven to ten years
/ / Company has shown the ability to make acquisitions of land to expand
mainland presence
- Too early in development stage to determine returns on these
investments
/ / Company has experienced below-expected returns on Bakersfield development,
but new management has been put in place with a more vigorous planning
process
/ / Company has good visibility for projected unit sales and price points
/ / Company has a number of new developments starting up in Bakersfield, CA
and Orlando, FL. EBITDA is projected to increase substantially over the
next several years and then remain relatively flat
/ / As the business shows no EBITDA growth from 2002-2004, the terminal value
multiple for the discount cash flow analysis is in line with average
homebuilders EBITDA multiples
CONFIDENTIAL 29
MAINLAND RESIDENTIAL SEGMENT - HISTORICAL AND PROJECTED FINANCIAL RESULTS(1)
REVENUES ($ IN MILLIONS) EBITDA (3) ($ IN MILLIONS)
- - - - --------------------------------------------------------------- -----------------------------------------------------------
[GRAPHICS] [GRAPHICS]
- - - - --------------------------------------------------------------- -----------------------------------------------------------
UNLEVERAGED FREE CASH FLOW(2) ($ IN MILLIONS) DEVELOPMENT & CAPITAL EXPENDITURES ($ IN MILLIONS)
- - - - --------------------------------------------------------------- -----------------------------------------------------------
[GRAPHICS] [GRAPHICS]
- - - - --------------------------------------------------------------- -----------------------------------------------------------
- - - - --------------
(1) Source: Sun Management's historical segment financial data and projections,
prepared in October 1999. 1999 data is estimated, since Management does not
update its model until the next year's projections are prepared.
(2) Assumes tax rate of 36%.
(3) EBITDA and EBIT include an addback of capitalized interest included in the
Company's cost of sales. Capitalized interest has been allocated between
Mainland and Hawaiian Residential Segments based on revenue.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 30
MAINLAND RESIDENTIAL SEGMENT - DISCOUNTED CASH FLOW ANALYSIS(1)
($ IN MILLIONS)
- - - - ----------------------------------------------------------------------------------------------------------------------------
1998A 1999E 2000P 2001P 2002P 2003P 2004P
----------- ----------- ---------- --------- ----------- ------------- -----------
Revenues $50.9 $59.1 $87.8 $100.2 $109.6 $102.5 $108.6
% GROWTH 88.6% 16.2% 48.5% 14.1% 9.3% (6.5)% 6.0%
EBITDA (2) $12.5 $13.2 $17.1 $17.5 $20.5 $20.2 $20.1
% MARGIN 23.4% 20.7% 17.4% 15.6% 16.9% 17.8% 16.7%
% GROWTH NA 6.2% 29.1% 2.3% 17.3% (1.6)% (0.3)%
Depreciation & amortization $0.6 $1.0 $1.8 $1.9 $2.0 $2.0 $2.0
EBIT(2) 11.9 12.2 15.3 15.6 18.6 18.2 18.1
Taxes @ 36.0% (4.3) (4.4) (5.5) (5.6) (6.7) (6.5) (6.5)
----------- ----------- ---------- --------- ----------- ------------- -----------
Unleveraged net income $7.6 $7.8 $9.8 $10.0 $11.9 $11.6 $11.6
Plus: Dep. & Amort. $0.6 $1.0 $1.8 $1.9 $2.0 $2.0 $2.0
Plus: Cost of sales 27.6 35.7 56.4 63.3 68.4 64.8 67.6
Less: Development expenditures (42.3) (47.8) (53.0) (58.8) (69.5) (52.1) (50.3)
Less: Capital expenditures (21.2) (13.7) (12.4) (1.7) (0.6) (0.6) (0.6)
Change in working capital 6.6 2.0 3.3 (2.2) (1.0) 0.4 (0.4)
----------- ----------- ---------- --------- ----------- ------------- -----------
Unleveraged free cash flow ($21.0) ($15.0) $5.8 $12.6 $11.2 $26.1 $29.9
----------- ----------- ---------- --------- ----------- ------------- -----------
----------- ----------- ---------- --------- ----------- ------------- -----------
- - - - ----------------------------------------------------------------------------------------------------------------------------
- - - - ------------
(1) Projections based on Sun Management projections dated October 1999, and
assumes a 36.0% tax rate.
(2) EBITDA and EBIT include an addback of capitalized interest included in the
Company's cost of sales. Capitalized interest has been allocated between
Mainland and Hawaiian Residential Segments based on revenue.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 31
MAINLAND RESIDENTIAL SEGMENT - DISCOUNTED CASH FLOW ANALYSIS (CONT.)(1)
ENTERPRISE VALUE BASED ON 2004P EBITDA EXIT MULTIPLES AND DISCOUNT RATES ($ IN MILLIONS)
-----------------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
----------------------------------------------------------------------------------
12.00% 12.50% 13.00% 13.50% 14.00%
------------- ---------------- ---------------- ---------------- -------------
5.0X $113.9 $111.7 $109.6 $107.6 $105.6
2004P EXIT 5.5X 119.6 117.3 115.1 112.9 110.8
MULTIPLE 6.0X 125.3 122.9 120.6 118.3 116.1
6.5X 131.0 128.5 126.0 123.6 121.3
7.0X 136.7 134.1 131.5 129.0 126.5
- - - - ------------------------------------------------------------------------------------------------------------------------------------
- - - - --------------
(1) DCF based upon Sun Management projections dated October 1999.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 32
MAINLAND RESIDENTIAL SEGMENT - COMPARABLE COMPANIES ANALYSIS
($IN MILLIONS, EXCEPT PER SHARE DATA)
- - - - ----------------------------------------------------------------------------------------------------------------
ENTERPRISE VALUE / EBITDA(2)
STOCK PRICE EQUITY ENTERPRISE -----------------------------------
COMPANY 5/12/00(1) VALUE VALUE LTM 2000P 2001P
- - - - ----------------------------------- ------------ --------- ----------- ----------- ---------- ----------
HOMEBUILDERS
Beazer Homes USA Inc $20.25 $179.0 $452.5 4.5x 4.6x 4.4x
Centex Corp 23.81 1,435.0 3,213.5 5.0x 5.5x 5.0x
D R Horton Inc 14.31 889.7 2,081.5 5.7x 5.6x NA
Kaufman & Broad Home Corp 19.00 792.5 2,239.9 5.5x 5.4x NA
Lennar Corp 18.75 921.9 1,641.9 4.5x 4.2x NA
Pulte Corp 22.69 991.5 1,679.7 5.2x 5.2x NA
Schuler Homes Inc 5.88 118.0 349.8 5.2x 4.7x NA
Standard Pacific Cp 11.06 320.9 653.4 4.5x 4.7x NA
Toll Brothers Inc 21.63 797.2 1,527.9 7.0x 6.6x 5.8x
Webb (Del E) Corp 14.81 271.5 1,363.7 7.5x 7.6x 6.8x
--------------------- ----------------------- ----------- ------------ ----------- -----------
HIGH 7.5X 7.6X 6.8X
HARMONIC MEAN(4) 5.3X 5.2X 5.4X
LOW 4.5X 4.2X 4.4X
--------------------- ----------------------- ----------- ------------ ----------- -----------
LAND DEVELOPERS/HOMEBUILDERS
Avatar Holdings Inc $20.50 $172.3 $148.5 14.2x 7.6x 4.7x
Catellus Development Corp 14.00 1,520.0 2,411.3 14.5x 10.7x 9.5x
Newhall Land &Farm -Lp 28.00 833.8 1,055.0 9.1x 8.8x 13.8x
--------------------- ----------------------- ----------- ------------ ----------- -----------
HIGH 14.5X 10.7X 13.8X
HARMONIC MEAN(4) 12.0X 8.9X 7.7X
LOW 9.1X 7.6X 4.7X
--------------------- ----------------------- ----------- ------------ ----------- -----------
- - - - ------------------------------------- ------------ ----------- ----------- ------------ ----------- -----------
HIGH 14.5X 10.7X 13.8X
HARMONIC MEAN(4) 6.1X 5.8X 6.2X
LOW 4.5X 4.2X 4.4X
- - - - ------------------------------------- ------------ ----------- ----------- ------------ ----------- -----------
- - - - ----------------------------------------------------------------------------------------
P/E(3) PRICE /
COMPANY LTM 2000P 2001P BOOK
- - - - -------------------------------------- ---------- ----------- ---------- -----------
HOMEBUILDERS
Beazer Homes USA Inc 4.9x 4.3x 4.0x 0.7x
Centex Corp 5.7x 5.6x 5.0x 1.1x
D R Horton Inc 5.4x 5.1x NA 1.1x
Kaufman & Broad Home Corp 5.7x 5.0x 4.5x 1.1x
Lennar Corp 6.8x 6.2x 5.6x 1.2x
Pulte Corp 5.6x 5.5x 5.1x 0.9x
Schuler Homes Inc 4.6x 4.3x 4.0x 0.6x
Standard Pacific Cp 4.9x 5.1x 5.1x 0.8x
Toll Brothers Inc 7.5x 6.9x 5.8x 1.2x
Webb (Del E) Corp 4.4x 4.0x 3.4x 0.6x
--------------------- ------------ ----------- ----------- -----------
HIGH 7.5X 6.9X 5.8X 1.2X
HARMONIC MEAN(4) 5.4X 5.1X 4.6X 0.9X
LOW 4.4X 4.0X 3.4X 0.6X
--------------------- ------------ ----------- ----------- -----------
LAND DEVELOPERS/HOMEBUILDERS
Avatar Holdings Inc NA 47.7x NA 0.9x
Catellus Development Corp 11.9x 10.4x 9.2x 2.6x
Newhall Land &Farm -Lp 9.7x 9.5x NA 6.0x
--------------------- ------------ ----------- ----------- -----------
HIGH 11.9X 47.7X 9.2X 6.0X
HARMONIC MEAN(4) 10.6X 13.5X 9.2X 3.1X
LOW 9.7X 9.5X 9.2X 0.9X
--------------------- ------------ ----------- ----------- -----------
- - - - ------------------------------------- ------------- ----------- ----------- -----------
HIGH 11.9X 47.7X 9.2X 6.0X
HARMONIC MEAN(4) 5.9X 5.9X 4.8X 1.5X
LOW 4.4X 4.0X 3.4X 0.6X
- - - - ------------------------------------- ------------- ----------- ----------- -----------
- - - - -------------
(1) Per FactSet Research Systems.
(2) Estimates per Wall Street research, where available.
(3) Estimates per First Call consensus.
(4) Arithmetic mean shown for Price / Book data.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 33
MAINLAND RESIDENTIAL SEGMENT - M&A COMPARABLE TRANSACTIONS ANALYSIS
($ IN MILLIONS)
- - - - ------------------------------------------------------------------------------------------------------------------------------------
ENTERPRISE VALUE/ EQUITY
EQUITY AGGREGATE LTM VALUE/
DATE DATE PURCHASE PURCHASE ------------------- LTM
ANNOUNCED EFFECTIVE TARGET / ACQUIRER PRICE PRICE PREMIUM EBITDA EBIT NET INCOME
- - - - --------------- ------------- ----------------------------------- --------- ------- ----------- ---------- --------- ------------
HOMEBUILDERS
12/19/97 04/20/98 Continental Homes Holding / $361.2 $647.9 59.5% 9.1x 9.6x 12.9x
DR Horton Inc.
02/17/00 05/03/00 US Home Corp / $490.1 $1135.4 33.0% 6.4x 7.0x 6.8x
Lennar
06/10/97 10/31/97 Pacific Greystone Corporation / $216.1 $379.7 21.3% 5.3x 5.4x 7.4x
Lennar Corporation
10/04/99 12/16/99 Newmark Homes / $107.5 $260.4 18.7% 6.4x 7.0x 6.7x
Technical Olympic USA
--------------------- -------------------- ------------------------------- ---------- -------- -------------
HIGH 59.5% 9.1X 9.6X 12.9X
HARMONIC MEAN(1) 33.1% 6.6X 7.0X 7.9X
LOW 18.7% 5.3X 5.4X 6.7X
--------------------- -------------------- ------------------------------- ---------- -------- -------------
TIME SHARE
01/24/00 - Fairfield Communities Inc / $689.1 $738.1 46.6% 7.2x 8.9x 13.0x
Carnival Corp
7/19/99 10/01/99 Vistana Inc. / $414.2 $386.6 35.7% 7.3x 9.0x 17.6x
Starwood Hotels & Resorts
Worldwide Inc.
--------------------- -------------------- ----------------------------- -------- -------- --------------
HIGH 46.6% 7.3X 9.0X 17.6X
HARMONIC MEAN(1) 41.1% 7.3X 9.0X 14.9X
LOW 35.7% 7.2X 8.9X 13.0X
--------------------- -------------------- ------------- --------- ------- ---------- -------- -------------
- - - - ----------------------- ------- ---------------------------------- ------------- --------- ------- ---------- -------- -------------
HIGH 59.5% 9.1X 9.6X 17.6X
HARMONIC MEAN(1) 35.8% 6.8X 7.5X 9.3X
LOW 18.7% 5.3X 5.4X 6.7X
- - - - ----------------------- ------- ------------------------------------------- ------------------- -------- -------- ------------- ----
- - - - -------------
(1) Arithmetic mean shown for premia data.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 34
MAINLAND RESIDENTIAL SEGMENT - SUMMARY VALUATION
($ IN MILLIONS)
- - - - ------------------------------------------------------------------------------------------------------------------------------
RELEVANT ENTERPRISE VALUE/
SEGMENT RELEVANT EBITDA MULTIPLE ENTERPRISE VALUE
-------------------------------- --------------------------------
EBITDA (4) LOW MEAN HIGH LOW MEAN HIGH
------------ -------- -------- -------- -------- -------- --------
DISCOUNTED CASH FLOW ANALYSIS(1) (2) $17.1 6.2x 7.1x 8.0x $105.6 $120.6 $136.7
COMPARABLE COMPANY ANALYSIS(2) $17.1 4.2x 5.8x 10.7x $71.8 $99.2 $182.9
M&A COMPARABLE TRANSACTION ANALYSIS(3) $13.2 5.3x 6.8x 9.1x $70.2 $90.1 $120.5
- - - - ------------------------------------------------------------------------------------------------------------------------------
- - - - -------------
(1) Assuming discount rates of 12.0%, 13.0% and 14.0% and 2004P EBITDA exit
multiples of 5.0x, 6.0x and 7.0x.
(2) Enterprise Value based on 2000P EBITDA.
(3) Enterprise Value based upon LTM EBITDA and Enterprise Value/LTM EBITDA
Multiples.
(4) EBITDA includes an addback of capitalized interest included in the
Company's cost of sales. Capitalized interest has been allocated between
Mainland and Hawaiian Residential Segments based on revenue.
CONFIDENTIAL 35
MAINLAND RESIDENTIAL SEGMENT - IMPLIED VALUE MATRIX
($ IN MILLIONS)
- - - - ------------------------------------------------------------------------------------------------------------------------------------
COMPARABLE COMPARABLE
INDICATIVE VALUE RANGE COMPANIES TRANSACTIONS
-----------------------------------------
$100.0 $110.0 $120.0 $130.0 RANGE(1) RANGE(1)
--------- ---------- ---------- -------- ------------- -------------
Indicative Value Multiple
1999 EBITDA(3) $13.2 7.5x 8.3x 9.1x 9.8x 4.5x - 14.2x 6.8x - 7.3x
2000E EBITDA(3) $17.1 5.8x 6.4x 7.0x 7.6x 4.6x - 8.8x NA
2001E EBITDA(3) $17.5 5.7x 6.3x 6.9x 7.4x 4.7x - 9.5x NA
Indicative Value Multiple
1999 EBIT(3) $12.2 8.2x 9.0x 9.8x 10.6x 4.9x - 18.9x 7.0x - 9.0x
2000E EBIT(3) $15.3 6.5x 7.2x 7.8x 8.5x 4.8x - 10.0x NA
2001E EBIT(3) $15.6 6.4x 7.0x 7.7x 8.3x 5.3x - 11.8x NA
Indicative Value / Identifiable Real Estate & PPE of $170.1 0.6x 0.6x 0.7x 0.8x 0.6x - 2.6x NA
Segment(2)
- - - - ------------------------------------------------------------------------------------------------------------------------------------
- - - - -----------
(1) Ranges derived from Mainland Residential Segment Comparable Companies
Analysis and Comparable Transaction Analysis, as applicable, excluding
outliers.
(2) Book value as of December 31, 1999.
(3) EBITDA and EBIT include an addback of capitalized interest included in the
Company's cost of sales. Capitalized interest has been allocated between
Mainland and Hawaiian Residential Segments based on revenue.
CONFIDENTIAL 36
SECTION 5-B
HAWAII RESIDENTIAL SEGMENT
HAWAII RESIDENTIAL (EXCLUDING LANA'I) SEGMENT - OVERVIEW
- Significant amount of undeveloped and unentitled landholdings should
provide inventory for next several the decades
- Base Business
- Strong expected growth due to new developments and improving
Hawaiian market
- Increase in home sale revenue is due to increase in velocity of home
sales and shift to higher price points
- With several new higher-end projects coming online, the Company
expects substantial growth in the next five years
- Terminal multiples in line with homebuilders as management expects
earnings growth to have stabilized at the end of the forecast period
- Growth may be so strong that an investor may view that achieving all
of it is unlikely
- Achieving a full discounted cash flow may therefore be difficult
- Unentitled and Unzoned Land
- The Company owns approximately 10,072 acres of unentitled and
unzoned land on the island of Oahu - 5,520 is conservation, and
4,552 is agricultural
- Hallstrom's appraisal value is $45 million under the most favorable
scenario
- Any cash flow from the development and sale of this land would
require governmental approvals and would require many years to begin
- Assumes Company can achieve entitlements and other approvals from
governmental authorities to develop currently owned unentitled land
- Given this uncertainty and extremely long-term outlook Bear Stearns
has estimated values ranging from $20-$45 million
CONFIDENTIAL 37
HAWAII RESIDENTIAL SEGMENT - HISTORICAL AND PROJECTED FINANCIAL RESULTS(1)
REVENUES ($ IN MILLIONS) EBITDA (3) ($ IN MILLIONS)
- - - - ----------------------------------------------------------------- --------------------------------------------------------------
[GRAPH] [GRAPH]
- - - - ----------------------------------------------------------------- --------------------------------------------------------------
UNLEVERAGED FREE CASH FLOW(2) ($ IN MILLIONS) DEVELOPMENT & CAPITAL EXPENDITURES ($ IN MILLIONS)
- - - - ----------------------------------------------------------------- --------------------------------------------------------------
[GRAPH] [GRAPH]
- - - - ----------------------------------------------------------------- --------------------------------------------------------------
- - - - ------------
(1) Source: Sun Management's historical segment financial data and projections,
prepared in October 1999. 1999 data is estimated, since Management does not
update its model until the next year's projections are prepared.
(2) Assumes tax rate of 36%.
(3) EBITDA and EBIT include an addback of capitalized interest included in the
Company's cost of sales. Capitalized interest has been allocated between
Mainland and Hawaiian Residential Segments based on revenue.
CONFIDENTIAL 38
HAWAII RESIDENTIAL SEGMENT - DISCOUNTED CASH FLOW ANALYSIS (1)
($ IN MILLIONS)
- - - - --------------------------------------------------------------------------------------------------------------
1998A 1999E 2000P 2001P 2002P 2003P 2004P
--------- --------- --------- --------- --------- -------- ---------
Revenues $113.6 $121.1 $136.6 $153.5 $182.4 $201.5 $202.5
% GROWTH 2.4% 6.6% 12.8% 12.4% 18.8% 10.4% 0.5%
EBITDA(2) $9.5 $12.0 $12.2 $13.1 $16.8 $21.0 $23.5
% MARGIN 8.4% 9.9% 8.9% 8.5% 9.2% 10.4% 11.6%
% GROWTH NA 26.0% 1.4% 7.8% 28.1% 25.3% 11.8%
Depreciation & amortization $0.6 $0.4 $0.5 $0.5 $0.5 $0.4 $0.4
EBIT(2) 9.0 11.6 11.7 12.7 16.3 20.6 23.1
Taxes @ 36.0% (3.2) (4.2) (4.2) (4.6) (5.9) (7.4) (8.3)
--------- --------- --------- --------- --------- -------- ---------
Unleveraged net income $5.7 $7.4 $7.5 $8.1 $10.4 $13.2 $14.8
Plus: Dep. & Amort. $0.6 $0.4 $0.5 $0.5 $0.5 $0.4 $0.4
Plus: Cost of sales 87.4 90.9 107.3 122.4 145.8 160.4 159.2
Less: Development Expenditures (59.9) (69.9) (107.1) (121.0) (137.1) (137.1) (96.4)
Less: Capital expenditures (0.2) (0.4) (0.6) (0.3) (0.4) (0.2) (0.2)
Other adjustments (1.0) 0.6 5.2 0.2 0.2 0.2 0.2
--------- --------- --------- --------- --------- -------- ---------
Unleveraged free cash flow $32.6 $29.0 $12.8 $9.9 $19.3 $36.9 $78.0
========= ========= ========= ========= ========= ======== =========
- - - - ---------------------------------------------------------------------------------------------------- ---------
- - - - -----------------
(1) Projections based on Sun Management projections dated October 1999, and
assumes a 36.0% tax rate.
(2) EBITDA and EBIT include an addback of capitalized interest included in the
Company's cost of sales. Capitalized interest has been allocated between
Mainland and Hawaiian Residential Segments based on revenue.
CONFIDENTIAL 39
HAWAII RESIDENTIAL SEGMENT - DISCOUNTED CASH FLOW ANALYSIS (CONT.) (1)
ENTERPRISE VALUE OF BASE BUSINESS (WITHOUT EXCESS LAND) BASED ON 2004P EBITDA
EXIT MULTIPLES AND DISCOUNT RATES ($ IN MILLIONS)
- - - - ------------------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
---------------------------------------------------------------------------
12.00% 12.50% 13.00% 13.50% 14.00%
------------ -------------- --------------- ---------------- --------------
5.0x $167.5 $164.4 $161.3 $158.3 $155.3
2004P EXIT 5.5x 174.2 170.9 167.7 164.5 161.4
MULTIPLE 6.0x 180.9 177.4 174.1 170.8 167.6
6.5x 187.6 184.0 180.4 177.0 173.7
7.0x 194.2 190.5 186.8 183.3 179.8
- - - - ------------------------------------------------------------------------------------------------------------------------------------
- - - - -------------
(1) DCF based upon Sun Management projections dated October 1999.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 40
HAWAII RESIDENTIAL SEGMENT - COMPARABLE COMPANIES ANALYSIS
($ IN MILLIONS, EXCEPT PER SHARE DATA)
===============================================================================================================
ENTERPRISE VALUE / EBITDA(2)
STOCK PRICE EQUITY ENTERPRISE -----------------------------------
COMPANY 5/12/00(1) VALUE VALUE LTM 2000P 2001P
- - - - ----------------------------------- ------------- ----------- ------------- ---------- ------------ -----------
HOMEBUILDERS
- - - - ------------
Beazer Homes Usa Inc $20.25 $179.0 $452.5 4.5x 4.6x 4.4x
Centex Corp 23.81 1,435.0 3,213.5 5.0x 5.5x 5.0x
D R Horton Inc 14.31 889.7 2,081.5 5.7x 5.6x NA
Kaufman & Broad Home Corp 19.00 792.5 2,239.9 5.5x 5.4x NA
Lennar Corp 18.75 921.9 1,641.9 4.5x 4.2x NA
Pulte Corp 22.69 991.5 1,679.7 5.2x 5.2x NA
Schuler Homes Inc 5.88 118.0 349.8 5.2x 4.7x NA
Standard Pacific 11.06 320.9 653.4 4.5x 4.7x NA
Toll Brothers Inc 21.63 797.2 1,527.9 7.0x 6.6x 5.8x
Webb (Del E) Corp 14.81 271.5 1,363.7 7.5x 7.6x 6.8x
----------------------------------------------------------------------------------------------
HIGH 7.5x 7.6x 6.8x
HARMONIC MEAN(4) 5.3x 5.2x 5.4x
LOW 4.5x 4.2x 4.4x
----------------------------------------------------------------------------------------------
LAND DEVELOPERS/HOMEBUILDERS
- - - - ----------------------------
Avatar Holdings Inc $20.50 $172.3 $148.5 14.2x 7.6x 4.7x
Catellus Development Corp 14.00 1,520.0 2,411.3 14.5x 10.7x 9.5x
Newhall Land &Farm 28.00 833.8 1,055.0 9.1x 8.8x 13.8x
----------------------------------------------------------------------------------------------
HIGH 14.5x 10.7x 13.8x
HARMONIC MEAN(4) 12.0x 8.9x 7.7x
LOW 9.1x 7.6x 4.7x
----------------------------------------------------------------------------------------------
===============================================================================================================
HIGH 14.5x 10.7x 13.8x
HARMONIC MEAN(4) 6.1x 5.8x 6.2x
LOW 4.5x 4.2x 4.4x
===============================================================================================================
P/E(3)
------------------------------------ PRICE /
COMPANY LTM 2000P 2001P BOOK
- - - - ------------------------------------- ------------ ----------- ----------- ---------
HOMEBUILDERS
- - - - ------------
Beazer Homes Usa Inc 4.9x 4.3x 4.0x 0.7x
Centex Corp 5.7x 5.6x 5.0x 1.1x
D R Horton Inc 5.4x 5.1x NA 1.1x
Kaufman & Broad Home Corp 5.7x 5.0x 4.5x 1.1x
Lennar Corp 6.8x 6.2x 5.6x 1.2x
Pulte Corp 5.6x 5.5x 5.1x 0.9x
Schuler Homes Inc 4.6x 4.3x 4.0x 0.6x
Standard Pacific 4.9x 5.1x 5.1x 0.8x
Toll Brothers Inc 7.5x 6.9x 5.8x 1.2x
Webb (Del E) Corp 4.4x 4.0x 3.4x 0.6x
---------------------------------------------------------------------
HIGH 7.5x 6.9x 5.8x 1.2x
HARMONIC MEAN(4) 5.4x 5.1x 4.6x 0.9x
LOW 4.4x 4.0x 3.4x 0.6x
---------------------------------------------------------------------
LAND DEVELOPERS/HOMEBUILDERS
- - - - ----------------------------
Avatar Holdings Inc NA 47.7x NA 0.9x
Catellus Development Corp 11.9x 10.4x 9.2x 2.6x
Newhall Land &Farm 9.7x 9.5x NA 6.0x
---------------------------------------------------------------------
HIGH 11.9x 47.7x 9.2x 6.0x
HARMONIC MEAN(4) 10.6x 13.5x 9.2x 3.1x
LOW 9.7x 9.5x 9.2x 0.9x
---------------------------------------------------------------------
======================================================================================
HIGH 11.9x 47.7x 9.2x 6.0x
HARMONIC MEAN(4) 5.9x 5.9x 4.8x 1.5x
LOW 4.4x 4.0x 3.4x 0.6x
======================================================================================
- - - - --------------------
(1) Per FactSet Research Systems.
(2) Estimates per Wall Street research, where available.
(3) Estimates per First Call consensus.
(4) Arithmetic mean shown for Price / Book data.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 41
HAWAII RESIDENTIAL SEGMENT - M&A COMPARABLE TRANSACTIONS ANALYSIS
($ IN MILLIONS)
- - - - ----------------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------------
EQUITY AGGREGATE
DATE DATE PURCHASE PURCHASE
ANNOUNCED EFFECTIVE TARGET / ACQUIRER PRICE PRICE PREMIUM
- - - - --------------- ------------- --------------------------------------------- ------------- ------------- -------------
HOMEBUILDERS
- - - - -------------------------------
12/19/97 04/20/98 Continental Homes Holding / $361.2 $647.9 59.5%
DR Horton Inc.
02/17/00 05/03/00 US Home Corp / $490.1 $1135.4 33.0%
Lennar
06/10/97 10/31/97 Pacific Greystone Corporation / $216.1 $379.7 21.3%
Lennar Corporation
10/04/99 12/16/99 Newmark Homes / $107.5 $260.4 18.7%
Technical Olympic USA
---------------------------------------------------------------------------------------------
HIGH 59.5%
HARMONIC MEAN(1) 33.1%
LOW 18.7%
---------------------------------------------------------------------------------------------
TIME SHARE
- - - - -------------------------------
01/24/00 - Fairfield Communities Inc / $689.1 $738.1 46.6%
Carnival Corp
7/19/99 10/01/99 Vistana Inc. / $414.2 $386.6 35.7%
Starwood Hotels & Resorts Worldwide Inc.
---------------------------------------------------------------------------------------------
HIGH 46.6%
HARMONIC MEAN(1) 41.1%
LOW 35.7%
---------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------------------
HIGH 59.5%
HARMONIC MEAN(1) 35.8%
LOW 18.7%
- - - - ---------------------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------------------
ENTERPRISE VALUE / LTM EQUITY VALUE/
DATE DATE ---------------------- LTM
ANNOUNCED EFFECTIVE TARGET / ACQUIRER EBITDA EBIT NET INCOME
- - - - ---------------- ---------- ----------------------------------------- -------- ------ -----------
HOMEBUILDERS
- - - - -------------------------------
12/19/97 04/20/98 Continental Homes Holding / 9.1x 9.6x 12.9x
DR Horton Inc.
02/17/00 05/03/00 US Home Corp / 6.4x 7.0x 6.8x
Lennar
06/10/97 10/31/97 Pacific Greystone Corporation / 5.3x 5.4x 7.4x
Lennar Corporation
10/04/99 12/16/99 Newmark Homes / 6.4x 7.0x 6.7x
Technical Olympic USA
------------------------------------------------------------------------------------------------
HIGH 9.1x 9.6x 12.9x
HARMONIC MEAN(1) 6.6x 7.0x 7.9x
LOW 5.3x 5.4x 6.7x
------------------------------------------------------------------------------------------------
TIME SHARE
- - - - -------------------------------
01/24/00 - Fairfield Communities Inc / 7.2x 8.9x 13.0x
Carnival Corp
7/19/99 10/01/99 Vistana Inc. / 7.3x 9.0x 17.6x
Starwood Hotels & Resorts Worldwide Inc.
------------------------------------------------------------------------------------------------
HIGH 7.3x 9.0x 17.6x
HARMONIC MEAN(1) 7.3x 9.0x 14.9x
LOW 7.2x 8.9x 13.0x
------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------
HIGH 9.1x 9.6x 17.6x
HARMONIC MEAN(1) 6.8x 7.5x 9.3x
LOW 5.3x 5.4x 6.7x
- - - - ------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------
- - - - -----------
(1) Arithmetic mean shown for premia data.
- - - - ------------------------------------------------------------------------------
42
CONFIDENTIAL
HAWAII RESIDENTIAL SEGMENT - SUMMARY VALUATION
($ IN MILLIONS)
- - - - ---------------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------------
RELEVANT ENTERPRISE VALUE/RELEVANT EBITDA MULTIPLE
SEGMENT -----------------------------------------
EBITDA (5) LOW MEAN HIGH
------------ ---------- --------- ---------------
DISCOUNTED CASH FLOW ANALYSIS(1) (2) (3) $12.2 12.8x 14.3x 16.0x
COMPARABLE COMPANY ANALYSIS(2) $12.2 4.2x 5.8x 10.7x
M&A COMPARABLE TRANSACTION ANALYSIS(4) $12.0 5.3x 6.8x 9.1x
- - - - ---------------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------
ENTERPRISE VALUE
-----------------------------------
LOW MEAN HIGH
------ -------- --------
DISCOUNTED CASH FLOW ANALYSIS(1) (2) (3) $155.3 $174.1 $194.2
COMPARABLE COMPANY ANALYSIS(2) $51.1 $70.6 $130.2
M&A COMPARABLE TRANSACTION ANALYSIS(4) $63.6 $81.6 $109.2
- - - - -------------------------------------------------------------------------------------------
- - - - ---------------
(1) Assuming discount rates of 12.0%, 13.0% and 14.0% and 2004P EBITDA exit
multiples of 5.0x, 6.0x and 7.0x.
(2) Enterprise value based on 2000P EBITDA.
(3) Does not include $20 - $45 million in raw land in Oahu.
(4) Enterprise value based on LTM EBITDA and LTM EBITDA multiples.
(5) EBITDA includes an addback of capitalized interest included in the
Company's cost of sales. Capitalized interest has been allocated between
Mainland and Hawaiian Residential Segments based on revenue.
- - - - ------------------------------------------------------------------------------
43
CONFIDENTIAL
HAWAII RESIDENTIAL SEGMENT - IMPLIED VALUE MATRIX (1)
($ IN MILLIONS)
- - - - ------------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------------
INDICATIVE VALUE RANGE
----------------------------------------------------
$135.0 $145.0 $155.0 $165.0 $175.0
------ ------ ------ ------ ------
Indicative Value Multiple
1999 EBITDA(3) $12.0 11.2x 12.1x 12.9x 13.7x 14.6x
2000E EBITDA(3) $12.2 11.1x 11.9x 12.7x 13.6x 14.4x
2001E EBITDA(3) $13.1 10.3x 11.1x 11.8x 12.6x 13.3x
2002E EBITDA(3) $16.8 8.0x 8.6x 9.2x 9.8x 10.4x
2003E EBITDA(3) $21.0 6.4x 6.9x 7.4x 7.8x 8.3x
2004E EBITDA(3) $23.5 5.7x 6.2x 6.6x 7.0x 7.4x
Indicative Value Multiple
1999 EBIT(3) $11.6 11.6x 12.5x 13.3x 14.2x 15.1x
2000E EBIT(3) $11.7 11.5x 12.4x 13.2x 14.1x 15.0x
2001E EBIT(3) $12.7 10.7x 11.5x 12.2x 13.0x 13.8x
2002E EBIT(3) $16.3 8.3x 8.9x 9.5x 10.1x 10.7x
2003E EBIT(3) $20.6 6.6x 7.0x 7.5x 8.0x 8.5x
2004E EBIT(3) $23.1 5.8x 6.3x 6.7x 7.1x 7.6x
Indicative Value / Identifiable Real Estate & PPE of
Segment(4) $198.4 0.7x 0.7x 0.8x 0.8x 0.9x
- - - - ------------------------------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------
COMPARABLE COMPARABLE
COMPANIES TRANSACTIONS
RANGE(2) RANGE(2)
------------- -------------
Indicative Value Multiple
1999 EBITDA(3) 4.5x - 14.2x 6.8x - 7.3x
2000E EBITDA(3) 4.6x - 8.8x NA
2001E EBITDA(3) 4.7x - 9.5x NA
2002E EBITDA(3) NA NA
2003E EBITDA(3) NA NA
2004E EBITDA(3) NA NA
Indicative Value Multiple
1999 EBIT(3) 4.9x - 18.9x 7.0x - 9.0x
2000E EBIT(3) 4.8x - 10.0x NA
2001E EBIT(3) 5.3x - 11.8x NA
2002E EBIT(3) NA NA
2003E EBIT(3) NA NA
2004E EBIT(3) NA NA
Indicative Value / Identifiable Real Estate & PPE of
Segment(4) 0.6x - 2.6x NA
- - - - ---------------------------------------------------------------------------------------------
- - - - --------------
(1) Does not include $20-$45 million of raw land in Oahu
(2) Ranges derived from Hawaii Residential Segment Comparable Companies
Analysis and Comparable Transaction Analysis, as applicable, excluding
outliers.
(3) EBITDA and EBIT include an addback of capitalized interest included in the
Company's cost of sales. Capitalized interest has been allocated between
Mainland and Hawaiian Residential Segments based on revenue.
(4) Book value as of December 31, 1999.
- - - - ------------------------------------------------------------------------------
44
CONFIDENTIAL
SECTION 5-C
MAINLAND COMMERCIAL SEGMENT
- - - - -------------------------------------------------------------------------------
MAINLAND COMMERCIAL SEGMENT - OVERVIEW
- Generally medium-term leases with tenants of average credit profile
- According to management, in-place rents are at or slightly below market,
due primarily to asset quality and supply / demand dynamics of each
particular market
- Atlanta market experiencing recent vacancy weakness and moderate degree of
absorption
- Atlanta assets are class A quality
- Remainder of properties are predominately located in secondary or tertiary
markets
- Bakersfield commercial market is stagnant
- Raleigh properties are well-located with strong tenants; Low
unemployment deters incoming corporate relocations
- Moderate growth in base rents and net operating income due to contractual
rent and estimated CPI increases
- Primary contributors to revenue growth:
- Lease-up of new Raleigh property
- 50,000 square feet of additional lease space in Bakersfield
- New, recently acquired hotel
- Aggressive tenant retention efforts and leasing of vacant space have
maintained majority of properties at strong occupancy levels
- Limited capital expenditures going forward due to significant retenanting
and releasing of space during 1997 - 1999
- Limited market for undeveloped land holdings
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 45
- - - - -------------------------------------------------------------------------------
MAINLAND COMMERCIAL SEGMENT - OVERVIEW (CONT.)
- Desire for Company to redeploy Hawaiian cash flows into Mainland
commercial properties may be limited by ability to find attractive
acquisition / development opportunities
- We believe these properties should be valued in the mid range of
comparable companies due to:
- Relatively strong asset and average tenant quality
- Overall above average strength of commercial markets
- Relative age, occupancies, limited required capital expenditures and
average lease terms
- DCF terminal value of 9.5x - 10.5x reflects stabilized cash flow. Discount
rate 10.0% - 12.0% represents risk associated with attaining tenants for
new properties discussed above
- Capitalization rate of 9.5% - 10.5% reflects a mix of property quality
with Bakersfield being less desirable and others being more desirable
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 46
- - - - -------------------------------------------------------------------------------
MAINLAND COMMERCIAL SEGMENT - HISTORICAL AND PROJECTED FINANCIAL RESULTS(1)
REVENUES ($ IN MILLIONS) EBITDA ($ IN MILLIONS)
- - - - -------------------------------------------------------------- -----------------------------------------------------------
[GRAPH] [GRAPH]
- - - - -------------------------------------------------------------- -----------------------------------------------------------
UNLEVERAGED FREE CASH FLOW(2) ($ IN MILLIONS) DEVELOPMENT & CAPITAL EXPENDITURES ($ IN MILLIONS)
- - - - -------------------------------------------------------------- -----------------------------------------------------------
[GRAPH] [GRAPH]
- - - - -------------------------------------------------------------- -----------------------------------------------------------
- - - - --------------
(1) Source: Sun Management's historical segment financial data and projections,
prepared in October 1999. 1999 data is estimated, since Management does not
update its model until the next year's projections are prepared.
(2) Assumes tax rate of 36%.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 47
- - - - -------------------------------------------------------------------------------
MAINLAND COMMERCIAL SEGMENT - CAPITALIZATION RATE ANALYSIS
- Company shows stabilized cash flow of $24.2 million in 2001. Applying a
capitalization rate of 9.5% - 10.5% implies a value of $231 - $255
million in 2001
- We then discount these numbers by 9.5% - 10.5% in order to arrive at a
present value of $209-$233 million
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 48
- - - - -------------------------------------------------------------------------------
MAINLAND COMMERCIAL SEGMENT - DISCOUNTED CASH FLOW ANALYSIS(1)
($ IN MILLIONS)
- - - - ---------------------------------------------------------------------------------------------------------------------------------
1998A 1999E 2000P 2001P 2002P 2003P 2004P
------------- ----------- ------------- ------------- ------------- ------------ ------------
Revenues $22.5 $27.4 $32.4 $36.5 $37.8 $39.1 $39.6
% GROWTH 9.6% 22.1% 18.2% 12.7% 3.5% 3.4% 1.4%
EBITDA $15.1 $18.5 $21.8 $25.4 $25.8 $26.5 $27.2
% MARGIN 66.9% 67.5% 67.1% 69.6% 68.3% 67.8% 68.6%
% GROWTH NA 23.0% 17.5% 16.9% 1.6% 2.6% 2.6%
Depreciation & amortization $ 4.8 $ 5.8 $ 6.9 $ 7.5 $ 7.6 $ 7.6 $ 7.6
EBIT 10.2 12.7 14.8 17.9 18.2 18.9 19.6
Taxes @ 36.0% (3.7) (4.6) (5.3) (6.5) (6.6) (6.8) (7.1)
------------- ----------- ------------- ------------- ------------- ------------ ------------
Unleveraged net income $ 6.6 $ 8.1 $ 9.5 $11.5 $11.7 $12.1 $12.5
Plus: Dep. & Amort. $ 4.8 $ 5.8 $ 6.9 $ 7.5 $ 7.6 $ 7.6 $ 7.6
Less: Capital expenditures (22.5) (22.7) (15.2) (1.2) (0.9) (1.0) (1.2)
Change in working capital (3.6) 0.0 0.0 0.0 0.0 0.0 0.0
------------- ----------- ------------- ------------- ------------- ------------ ------------
Unleveraged free cash flow ($14.8) ($8.8) $ 1.2 $17.7 $18.4 $18.7 $19.0
------------- ----------- ------------- ------------- ------------- ------------ ------------
------------- ----------- ------------- ------------- ------------- ------------ ------------
Adjusted NOI(2) $13.9 $17.3 $20.6 $24.2 $24.9 $25.5 $26.0
- - - - ---------------------------------------------------------------------------------------------------------------------------------
- - - - ---------------
(1) Projections based on Sun Management projections dated October 1999, and
assumes a 36.0% tax rate.
(2) Based on the respective years' EBITDA less maintenance capital expenditure.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 49
- - - - --------------------------------------------------------------------------------
MAINLAND COMMERCIAL SEGMENT - DISCOUNTED CASH FLOW ANALYSIS (CONT.) (1)
ENTERPRISE VALUE BASED ON 2004P ADJUSTED NOI EXIT MULTIPLES AND DISCOUNT RATES ($ IN MILLIONS)
- - - - ---------------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
--------------------------------------------------------------------
10.00% 10.50% 11.00% 11.50% 12.00%
------------ ---------- ------------ ------------ --------------
2004P EXIT 9.5X $202.6 $198.4 $194.3 $190.3 $186.4
MULTIPLE 10.0X 210.6 206.2 202.0 197.8 193.7
10.5X 218.6 214.1 209.6 205.3 201.1
- - - - ---------------------------------------------------------------------------------------------------------------------------------
- - - - ----------------
(1) DCF based upon Sun Management projections dated October 1999.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 50
- - - - --------------------------------------------------------------------------------
MAINLAND COMMERCIAL SEGMENT - COMPARABLE COMPANIES ANALYSIS
($ IN MILLIONS, EXCEPT PER SHARE DATA)
- - - - ----------------------------------------------------------------------------------------------------------------
ENTERPRISE VALUE / EBITDA(2)
STOCK PRICE EQUITY ENTERPRISE ----------------------------------
COMPANY 5/12/00(1) VALUE VALUE LTM 2000P 2001P
- - - - ---------------------------------- -------------- ---------- ----------- ---------- ---------- ---------
OFFICE
Brandywine Realty Trust $18.00 $741.2 $1,708.0 9.5x 9.4x 8.6x
Corporate Office Properties 8.81 259.4 712.5 12.8x 9.6x 8.9x
Highwoods Properties Inc 23.50 1,620.8 3,749.9 9.7x 10.0x 9.7x
Keystone Property Trust Corp 13.06 212.2 815.9 13.0x 10.5x 9.9x
Koger Equity Inc 17.94 509.0 860.5 9.7x 9.5x 7.7x
Mack Cali Realty Corp 27.25 1,841.9 3,323.4 9.3x 8.6x 8.0x
Parkway Properties Inc 30.25 97.1 671.5 10.8x 9.9x 9.2x
Prime Group Realty Trust 15.56 407.0 1,324.6 12.0x 8.6x NA
PS Business Parks 24.88 805.3 823.1 9.1x NA NA
------------------- ------------ ----------- ----------- ------------ ----------- -----------
HIGH 13.0X 10.5X 9.9X
HARMONIC MEAN(4) 10.7X 9.5X 8.8X
LOW 9.1X 8.6X 7.7X
------------------- ------------ ----------- ----------- ------------ ----------- -----------
RETAIL
Center Trust $6.69 $192.9 $979.3 10.5x 11.5x 13.5x
Kimco Realty Corp 40.56 2,487.4 4,041.2 13.6x 11.9x 10.8x
Kranzco Realty Trust 9.19 97.1 534.4 9.6x 7.6x 6.9x
Pan Pacific Retail Properties 20.00 425.2 781.4 10.3x 9.3x 8.4x
------------------- ------------ ----------- ----------- ------------ ----------- -----------
HIGH 13.6X 11.9X 13.5X
HARMONIC MEAN(4) 10.8X 9.7X 9.3X
LOW 9.6X 7.6X 6.9X
------------------- ------------ ----------- ----------- ------------ ----------- -----------
- - - - ------------------------------------- ------------ ----------- ----------- ------------ ----------- -----------
HIGH 13.6X 11.9X 13.5X
HARMONIC MEAN(4) 10.6X 9.5X 9.0X
LOW 9.1X 7.6X 6.9X
- - - - ------------------------------------- ------------ ----------- ----------- ------------ ----------- -----------
- - - - ----------------------------------------------------------------------------------------
P/FFO(3)
--------------------------------- PRICE /
COMPANY LTM 2000P 2001P BOOK
- - - - --------------------------------------- --------- ---------- ---------- ------------
OFFICE
Brandywine Realty Trust 7.4x 6.9x 6.4x 1.1x
Corporate Office Properties 8.2x 7.4x 6.9x 1.4x
Highwoods Properties Inc 6.8x 6.3x 5.9x 1.1x
Keystone Property Trust Corp 7.3x 7.0x 6.6x 1.1x
Koger Equity Inc 7.7x 7.3x 6.7x 1.1x
Mack Cali Realty Corp 8.2x 7.7x 7.2x 1.3x
Parkway Properties Inc 8.3x 7.7x 6.9x 1.2x
Prime Group Realty Trust 7.6x 7.5x 6.9x 1.2x
PS Business Parks 10.2x 9.1x 8.3x 1.5x
------------------- ------------ ----------- ----------- -----------
HIGH 8.3X 7.7X 7.2X 1.4X
HARMONIC MEAN(4) 7.7X 7.2X 6.7X 1.2X
LOW 6.8X 6.3X 5.9X 1.1X
------------------- ------------ ----------- ----------- -----------
RETAIL
Center Trust 4.5x 5.1x 4.9x 0.7x
Kimco Realty Corp 11.2x 10.1x 9.2x 1.6x
Kranzco Realty Trust 4.9x 4.3x NA 0.6x
Pan Pacific Retail Properties 8.7x 8.0x 7.4x 1.1x
------------------- ------------ ----------- ----------- -----------
HIGH 11.2X 10.1X 9.2X 1.6X
HARMONIC MEAN(4) 6.3X 6.1X 6.7X 0.8X
LOW 4.5X 4.3X 4.9X 0.6X
------------------- ------------ ----------- ----------- -----------
- - - - ------------------------------------- ------------ ----------- ----------- -----------
HIGH 11.2X 10.1X 9.2X 1.6X
HARMONIC MEAN(4) 7.3X 6.9X 6.8X 1.1X
LOW 4.5X 4.3X 4.9X 0.6X
- - - - ------------------------------------- ------------ ----------- ----------- -----------
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 51
- - - - -------------------------------------------------------------------------------
- - - - ---------------
(1) Arithmetic mean shown for Price / Book data.
(2) Estimates per Wall Street research, where available.
(3) Estimates per First Call consensus.
(4) Arithmetic mean shown for Price / Book data.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 52
- - - - -------------------------------------------------------------------------------
MAINLAND COMMERCIAL SEGMENT - M&A COMPARABLE TRANSACTIONS ANALYSIS
($ IN MILLIONS)
- - - - ----------------------------------------------------------------------------------------------------------------------
EQUITY AGGREGATE
DATE DATE PURCHASE PURCHASE PREMIUM/
ANNOUNCED EFFECTIVE TARGET / ACQUIRER PRICE PRICE (DISCOUNT)
- - - - -------------- ------------- ----------------------------------------- --------------- ----------- --------------
RETAIL
5/29/98 8/6/98 Mid-America Realty Investments $87.2 $148.6 3.7%
Bradley Real Estate Inc
11/13/97 6/15/98 Horizon Group, Inc. $388.8 $933.5 (1.9%)
Prime Retail, Inc.
8/25/97 12/17/97 Arbor Property Trust $102.3 $227.2 6.5%
Vornado Realty Trust
3/26/96 8/9/96 DeBartolo Realty Corp. $1,490.4 $2,937.4 27.5%
Simon Property Group Inc.
10/30/95 3/15/96 Tucker Properties Corp. $105.5 $273.5 (16.9%)
Bradley Real Estate Inc.
3/14/95 7/14/95 McArthur/Glen Realty Corp. $315.4 $522.1 (1.0%)
Horizon Outlet Centers Inc.
----------------------- ---------------------------------- ------------- ------------- -------------
HIGH 27.5%
HARMONIC MEAN(1) 3.0%
LOW (16.9%)
----------------------- ---------------------------------- ------------- ------------- -------------
- - - - -------------------------------------------------------------------------------------------------------------------------
Enterprise Value / LTM
Date Date ------------------------- Equity Value/
Announced Effective Target / Acquirer EBITDA EBIT LTM FFO
- - - - --------------- ------------- -------------------------------------------- ------------- ---------- --------------
RETAIL
5/29/98 8/6/98 Mid-America Realty Investments 10.5 x 16.3 x 10.1 x
Bradley Real Estate Inc
11/13/97 6/15/98 Horizon Group, Inc. 9.6 x 17.3 x 7.8 x
Prime Retail, Inc.
8/25/97 12/17/97 Arbor Property Trust 12.2 x 15.9 x 10.9 x
Vornado Realty Trust
3/26/96 8/9/96 DeBartolo Realty Corp. 13.2 x 31.5 x 9.1 x
Simon Property Group Inc.
10/30/95 3/15/96 Tucker Properties Corp. 9.5 x 15.8 x 6.9 x
Bradley Real Estate Inc.
3/14/95 7/14/95 McArthur/Glen Realty Corp. 12.2 x 23.4 x 10.3 x
Horizon Outlet Centers Inc.
----------------------- ---------------------------------- ------------- ------------- --------------
HIGH 13.2x 31.5x 10.9x
HARMONIC MEAN(1) 11.1x 18.8x 8.9x
LOW 9.5x 15.8x 6.9x
----------------------- ---------------------------------- ------------- ------------- --------------
- - - - -------------------------------------------------------------------------------------------------------------------------
- - - - -----------
(1) Arithmetic mean shown for premia data.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 53
- - - - -------------------------------------------------------------------------------
MAINLAND COMMERCIAL SEGMENT - M&A COMPARABLE TRANSACTIONS ANALYSIS (CONT.)
($ IN MILLIONS, EXCEPT PER SHARE DATA)
- - - - ----------------------------------------------------------------------------------------------------------------------
EQUITY AGGREGATE
DATE DATE PURCHASE PURCHASE
ANNOUNCED EFFECTIVE TARGET / ACQUIRER PRICE PRICE PREMIUM
- - - - ---------------- ------------ ------------------------------------------- ------------ ----------- ---------------
OFFICE
9/8/97 10/14/97 Shidler Group-Mid-Atlantic $170.0 $253.0 NA
Royale Investments Inc.
9/15/97 12/19/97 Beacon Properties Corp. $3,006.8 $4,040.6 30.8%
Equity Office Properties Trust
4/29/96 9/23/96 Crocker Realty Trust Inc. $297.9 $532.4 14.8%
Highwoods Properties Inc.
------------------- -------------------------------------- ------------- ------------- -------------
HIGH 30.8%
HARMONIC MEAN(1) 22.8%
LOW 14.8%
------------------- -------------------------------------- ------------- ------------- -------------
REIT LBO/MBO
12/2/98 6/8/99 Irvine Apartment Communities $1,542.3 $2,528.6 25.6%
TIC Acquisition L.L.C.
3/4/99 10/15/99 Berkshire Realty Co. Inc. $574.4 $1,292.8 29.5%
Aptco L.L.C.
4/5/99 11/22/99 SunStone Hotel Investors Inc. $412.5 $907.9 43.8%
SHP Acquisition L.L.C.
6/7/99 NA Burnham Pacific Properties Inc. $459.0 $1,215.0 21.3%
Schottenstein Stores Corp.
9/24/99 2/29/00 Walden Residential Properties Inc. $715.0 $1,538.1 23.2%
Oly Hightop
------------------- -------------------------------------- ------------- ------------- -------------
HIGH 43.8%
HARMONIC MEAN(1) 28.7%
LOW 21.3%
------------------- -------------------------------------- ------------- ------------- -------------
- - - - -----------------------------------------------------------------------------------------------------------------------
ENTERPRISE VALUE / LTM
DATE DATE ------------------------ EQUITY VALUE/
ANNOUNCED EFFECTIVE TARGET / ACQUIRER EBITDA EBIT LTM FFO
- - - - ---------------- ----------- --------------------------------------------- ------------ ---------- ---------------
OFFICE
9/8/97 10/14/97 Shidler Group-Mid-Atlantic 18.5 x 24.3 x 4.3 x
Royale Investments Inc.
9/15/97 12/19/97 Beacon Properties Corp. 24.4 x 35.9 x 23.8 x
Equity Office Properties Trust
4/29/96 9/23/96 Crocker Realty Trust Inc. 15.2 x 20.7 x 19.4 x
Highwoods Properties Inc.
------------------- -------------------------------------- ------------- ------------- --------------
HIGH 24.4x 35.9x 23.8x
HARMONIC MEAN(1) 18.7x 25.6x 9.1x
LOW 15.2x 20.7x 4.3x
------------------- -------------------------------------- ------------- ------------- --------------
REIT LBO/MBO
12/2/98 6/8/99 Irvine Apartment Communities 18.3x 23.9x 13.5x
TIC Acquisition L.L.C.
3/4/99 10/15/99 Berkshire Realty Co. Inc. 12.6x 14.9x 9.7x
Aptco L.L.C.
4/5/99 11/22/99 SunStone Hotel Investors Inc. 11.0x 19.5x 7.2x
SHP Acquisition L.L.C.
6/7/99 NA Burnham Pacific Properties Inc. 13.1x 19.1x 8.3x
Schottenstein Stores Corp.
9/24/99 2/29/00 Walden Residential Properties Inc. 10.0x 17.4x 9.0x
Oly Hightop
------------------- -------------------------------------- ------------- ------------- --------------
HIGH 18.3x 23.9x 13.5x
HARMONIC MEAN(1) 12.5x 18.5x 9.1x
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 54
- - - - -------------------------------------------------------------------------------
LOW 10.0x 14.9x 7.2x
------------------- -------------------------------------- ------------- ------------- --------------
- - - - ----------------
(1) Arithmetic mean shown for premia data.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 55
- - - - -------------------------------------------------------------------------------
MAINLAND COMMERCIAL SEGMENT - M&A COMPARABLE TRANSACTIONS ANALYSIS (CONT.)
($ IN MILLIONS)
- - - - ----------------------------------------------------------------------------------------------------------------------
EQUITY AGGREGATE
DATE DATE PURCHASE PURCHASE PREMIUM
ANNOUNCED EFFECTIVE TARGET / ACQUIRER PRICE PRICE (DISCOUNT)
- - - - ---------------- ------------ ------------------------------------------- ----------- ----------- ---------------
MULTI-FAMILY/APARTMENT COMMUNITIES
- - - - ---------------------------------------
7/8/98 10/20/98 Merry Land & Investment Co Inc. $983.52 $2,024.9 4.2%
Equity Residential Properties Trust
3/9/98 6/3/98 Avalon Properties Inc. $946.03 $1,445.5 (2.9%)
Bay Apartment Communities Inc.
12/2/98 6/8/99 Irvine Apartment Communities $634.37 $1,554.1 20.5%
Irvine Co
12/23/97 5/8/98 Ambassador Apartments, Inc. $267.5 $666.0 5.0%
Apartment Investment and Management Co.
12/17/97 4/8/98 Oasis Residential, Inc. $397.2 $943.1 9.8%
Camden Property Trust
8/28/97 12/23/97 Evans Withycombe Residential, Inc. $632.2 $1,063.2 18.9%
Equity Residential Properties Trust
8/4/97 12/24/97 Columbus Realty Trust $340.9 $567.8 4.5%
Post Properties, Inc.
1/16/97 5/30/97 Wellsford Residential Property Trust $467.2 $946.4 7.9%
Equity Residential Properties Trust
12/16/96 5/15/97 Paragon Group Inc. $327.5 $611.4 13.7%
Camden Property Trust
10/1/96 12/31/96 South West Property Trust inc. $347.8 $560.3 25.5%
United Dominion Realty Trust Inc.
7/18/96 2/12/97 ROC Communities Inc. $347.4 $486.9 17.5%
Chateau Properties Inc.
10/12/95 3/15/96 Real Estate Investment Trust of California $189.4 $271.5 21.7%
BRE Properties
- - - - ---------------- -------------- ------------------------------------------- ------------- ------------- -------------
- - - - -------------------------------------------------------------------------------------------------------------------------
ENTERPRISE VALUE / LTM
DATE DATE ------------------------- EQUITY VALUE/
ANNOUNCED EFFECTIVE TARGET / ACQUIRER EBITDA EBIT LTM FFO
- - - - ---------------- ------------ --------------------------------------------- ------------ ----------- ---------------
MULTI-FAMILY/APARTMENT COMMUNITIES
- - - - ----------------------------------------
7/8/98 10/20/98 Merry Land & Investment Co Inc. 13.7 x 20.9 x 8.7 x
Equity Residential Properties Trust
3/9/98 6/3/98 Avalon Properties Inc. 13.8 x 19.1 x 10.8 x
Bay Apartment Communities Inc.
12/2/98 6/8/99 Irvine Apartment Communities 12.3 x 16.9 x 6.5 x
Irvine Co
12/23/97 5/8/98 Ambassador Apartments, Inc. 13.9 x 23.2 x 12.7 x
Apartment Investment and Management Co.
12/17/97 4/8/98 Oasis Residential, Inc. 13.4 x 18.5 x 8.5 x
Camden Property Trust
8/28/97 12/23/97 Evans Withycombe Residential, Inc. 15.1 x 22.9 x 15.4 x
Equity Residential Properties Trust
8/4/97 12/24/97 Columbus Realty Trust 16.8 x 26.6 x 14.2 x
Post Properties, Inc.
1/16/97 5/30/97 Wellsford Residential Property Trust 13.0 x 20.4 x 6.4 x
Equity Residential Properties Trust
12/16/96 5/15/97 Paragon Group Inc. 11.5 x 17.7 x NA
Camden Property Trust
10/1/96 12/31/96 South West Property Trust inc. 13.1 x 13.6 x 11.4 x
United Dominion Realty Trust Inc.
7/18/96 2/12/97 ROC Communities Inc. 15.2 x 24.6 x 14.0 x
Chateau Properties Inc.
10/12/95 3/15/96 Real Estate Investment Trust of California 12.2 x 16.2 x 12.4 x
BRE Properties
- - - - -------------------------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 56
- - - - -------------------------------------------------------------------------------
MAINLAND COMMERCIAL SEGMENT - M&A COMPARABLE TRANSACTIONS ANALYSIS (CONT.)
($ IN MILLIONS)
- - - - ----------------------------------------------------------------------------------------------------------------------
EQUITY AGGREGATE
DATE DATE PURCHASE PURCHASE
ANNOUNCED EFFECTIVE TARGET / ACQUIRER PRICE PRICE PREMIUM
- - - - ---------------- ------------ ------------------------------------------ ------------- ------------ --------------
MULTI-FAMILY/APARTMENT COMMUNITIES (CONT.)
- - - - ---------------------------------------------------------------------------
2/27/95 6/29/95 America First Real Estate Investment Trust $54.9 $101.8 40.8%
Mid-America Apartment Communities Inc.
8/3/94 12/13/94 Holly Residential Properties Inc. $119.8 $243.1 29.0%
Wellsford Residential Property Trust
12/7/94 3/23/95 Security Capital Pacific Trust $138.7 $232.2 (0.8%)
Property Trust of America
----------------------------------------------------------------------------------------------------
HIGH 40.8%
HARMONIC MEAN(1) 14.4%
LOW (2.9%)
----------------------------------------------------------------------------------------------------
OTHER
- - - - -----
6/17/94 9/30/94 Health Equity Properties Inc. $160.6 $177.1 13.8%
Omega Healthcare Investors Inc.
4/26/95 6/19/96 Copley Properties Inc. $47.2 $101.9 127.3%
EastGroup Properties
10/31/96 7/1/97 Bay Meadows/California Jockey Club $190.2 $181.8 66.0%
Patriot American Hospitality Inc.
----------------------------------------------------------------------------------------------------
HIGH 127.3%
HARMONIC MEAN(1) 69.0%
LOW 13.8%
----------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------------------
HIGH 127.3%
HARMONIC MEAN(1) 20.3%
LOW (16.9%)
- - - - ---------------------------------------------------------------------------------------------------------------------
- - - - -----------------------------------------------------------------------------------------------------------------------
ENTERPRISE VALUE / LTM
DATE DATE -------------------------- EQUITY VALUE/
ANNOUNCED EFFECTIVE TARGET / ACQUIRER EBITDA EBIT LTM FFO
- - - - ---------------- ------------ ------------------------------------------ ------------- ------------ --------------
MULTI-FAMILY/APARTMENT COMMUNITIES (CONT.)
- - - - ------------------------------------------
2/27/95 6/29/95 America First Real Estate Investment Trust 15.6 x 31.5 x 14.0 x
Mid-America Apartment Communities Inc.
8/3/94 12/13/94 Holly Residential Properties Inc. 13.4 x 18.9 x 11.6 x
Wellsford Residential Property Trust
12/7/94 3/23/95 Security Capital Pacific Trust 2.9 x 4.0 x 2.1 x
Property Trust of America
----------------------------------------------------------------------------------------------------
HIGH 16.8x 31.5x 15.4x
HARMONIC MEAN(1) 11.0x 15.7x 8.1x
LOW 2.9x 4.0x 2.1x
----------------------------------------------------------------------------------------------------
OTHER
- - - - -----
6/17/94 9/30/94 Health Equity Properties Inc. 8.6 x 12.6 x 9.0 x
Omega Healthcare Investors Inc.
4/26/95 6/19/96 Copley Properties Inc. 11.8 x 20.1 x 10.1 x
EastGroup Properties
10/31/96 7/1/97 Bay Meadows/California Jockey Club 18.5 x 22.5 x 19.3 x
Patriot American Hospitality Inc.
----------------------------------------------------------------------------------------------------
HIGH 18.5x 22.5x 19.3x
HARMONIC MEAN(1) 11.7x 17.3x 11.4x
LOW 8.6x 12.6x 9.0x
----------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------------------
HIGH 24.4 x 35.9 x 23.8 x
HARMONIC MEAN(1) 11.7x 17.4x 8.8x
LOW 2.9 x 4.0 x 2.1 x
- - - - ---------------------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 57
- - - - -------------------------------------------------------------------------------
- - - - --------------
(1) Arithmetic mean shown for premia data.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 58
- - - - -------------------------------------------------------------------------------
MAINLAND COMMERCIAL SEGMENT - SUMMARY VALUATION
($ IN MILLIONS)
- - - - ----------------------------------------------------------------------------------------------------------------
RELEVANT ENTERPRISE VALUE/RELEVANT EBITDA MULTIPLE
SEGMENT --------------------------------------------
EBITDA LOW MEAN HIGH
-------------- ------------- -------------- ---------------
DISCOUNTED CASH FLOW ANALYSIS(1) (2) $21.8 8.6x 9.3x 10.1x
COMPARABLE COMPANY ANALYSIS(2) $21.8 7.6x 9.5x 11.9x
M&A COMPARABLE TRANSACTION ANALYSIS(3) $18.5 8.6x 11.7x 18.5x
- - - - ----------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------
ENTERPRISE VALUE
---------------------------------------
LOW MEAN HIGH
---------- ---------- ----------
DISCOUNTED CASH FLOW ANALYSIS(1) (2) $186.4 $202.0 $218.6
COMPARABLE COMPANY ANALYSIS(2) $165.3 $206.7 $258.9
M&A COMPARABLE TRANSACTION ANALYSIS(3) $159.2 $216.6 $342.5
- - - - -------------------------------------------------------------------------------------------
- - - - -----------------
(1) Assuming discount rates of 10.0%, 11.0% and 12.0% and 2004P Adjusted NOI
exit multiples of 9.5x, 10.0x and 10.5x.
(2) Enterprise Value based on 2000P EBITDA.
(3) Enterprise Value based upon LTM EBITDA and LTM EBITDA Multiples. Excludes
EBITDA multiples from Beacon Properties (24.4x) and Security Capital
acquisitions (2.9x).
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 59
- - - - -------------------------------------------------------------------------------
MAINLAND COMMERCIAL SEGMENT - IMPLIED VALUE MATRIX
($ IN MILLIONS)
- - - - ---------------------------------------------------------------------------------------------------------------------------------
INDICATIVE VALUE RANGE
----------------------------------------------------------
$210.0 $220.0 $230.0 $240.0
------------- ------------ ------------ ------------
Indicative Value Multiple
1999 EBITDA $18.5 11.3x 11.9x 12.4x 13.0x
2000E EBITDA $21.8 9.7x 10.1x 10.6x 11.0x
2001E EBITDA $25.4 8.3x 8.6x 9.0x 9.4x
Indicative Value Multiple
1999 EBIT $12.7 16.6x 17.4x 18.1x 18.9x
2000E EBIT $14.8 14.2x 14.9x 15.5x 16.2x
2001E EBIT $17.9 11.7x 12.3x 12.8x 13.4x
1999 Adjusted NOI(3) $17.3 12.1x 12.7x 13.3x 13.9x
2000E Adjusted NOI(3) $20.6 10.2x 10.7x 11.2x 11.7x
2001E Adjusted NOI(3) $24.2 8.7x 9.1x 9.5x 9.9x
Indicative Value / Identifiable Real Estate & PPE of $194.4 1.1x 1.1x 1.2x 1.2x
Segment(2)
- - - - --------------------------------------------------------------------------------------------
COMPARABLE COMPARABLE
COMPANIES TRANSACTIONS
RANGE(1) RANGE(1)
-------------- --------------
Indicative Value Multiple
1999 EBITDA 9.3x-12.8x 8.6x-18.5x
2000E EBITDA 8.6x-11.5x NA
2001E EBITDA 7.7x-10.8x NA
Indicative Value Multiple
1999 EBIT 13.5x-32.6x 12.6x-31.5x
2000E EBIT 10.8x-23.4x NA
2001E EBIT 9.8x-19.4x NA
1999 Adjusted NOI(3) NA NA
2000E Adjusted NOI(3) NA NA
2001E Adjusted NOI(3) NA NA
Indicative Value / Identifiable Real Estate & PPE of 0.7x-1.5x NA
Segment(2)
- - - - -------------
(1) Ranges derived from Mainland Commercial Segment Comparable Companies
Analysis and Comparable Transaction Analysis, as applicable, excluding
outliers.
(2) Book value as of December 31, 1999.
(3) Adjusted NOI based on the respective years' EBITDA less $1.2 million in
maintenance capital expenditures.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 60
SECTION 5-D
HAWAII COMMERCIAL SEGMENT
- - - - -------------------------------------------------------------------------------
HAWAII COMMERCIAL SEGMENT - OVERVIEW
- Weak Hawaii Commercial Segment market has kept occupancies lower than
desired and have delayed buildout of certain undeveloped Hawaii parcels
- Properties consist generally of B-market locations with mix of strong
credit tenants with long term leases and smaller, local tenants
- Due to higher occupancies, moderate economic environment and soft Hawaii
Commercial Segment market, these properties are valued at the lower range
of comparable properties and at higher capitalization rates
- Cannery development has suffered vacancies due to weak retail market at
Shops at Dole Cannery
- Redevelopment efforts are in place to attempt to increase cash flows
and occupancy
- We believe that these properties should be valued towards the lower range
of comparable companies and respective cash flows discounted back at a
higher rate due to the overall softness of the commercial and retail
market and the above-average risk of the underlying projected cash flows
- No new developments have been planned for the projection period
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 61
- - - - -------------------------------------------------------------------------------
HAWAII COMMERCIAL SEGMENT - CAPITALIZATION RATE ANALYSIS
- Bear Stearns' capitalization rate analysis is based on a stabilized cash
flow of $11.0 million; Applying a capitalization rate of 9.0%-10.0%
implies a value of $110-$120 million
- Bear Stearns used Sun's 1999E Adjusted NOI as the bases for stabilized
free cash flow
- While the Company's projections show EBITDA increasing significantly from
2000-2003, during the course of our due diligence and in discussions with
management, they have acknowledged that their projections for this segment
are aggressive and assume significant lease up of select properties
- Management's growth projections are based on its ability to:
- Lease retail and office space at the old Dole Cannery (which
is currently nearly completely vacant even though the Company
has been trying to find tenants for several years)
- Lease the 10 acre Dole Cannery backlot
- Find a large tenant for the Mililani Town Center
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 62
- - - - -------------------------------------------------------------------------------
HAWAII COMMERCIAL SEGMENT - HISTORICAL AND PROJECTED FINANCIAL RESULTS(1)
REVENUES ($ IN MILLIONS) EBITDA ($ IN MILLIONS)
- - - - ------------------------------------------------------------------ ------------------------------------------------------------
[GRAPH] [GRAPH]
- - - - ------------------------------------------------------------------ ------------------------------------------------------------
UNLEVERAGED FREE CASH FLOW(2) ($ IN MILLIONS) DEVELOPMENT & CAPITAL EXPENDITURES ($ IN MILLIONS)
- - - - ------------------------------------------------------------------
------------------------------------------------------------
[GRAPH] [GRAPH]
- - - - ------------------------------------------------------------------ ------------------------------------------------------------
- - - - -----------------
(1) Source: Sun Management's historical segment financial data and projections,
prepared in October 1999. 1999 data is estimated, since Management does not
update its model until the next year's projections are prepared.
(2) Assumes tax rate of 36%.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 63
- - - - -------------------------------------------------------------------------------
HAWAII COMMERCIAL SEGMENT - DISCOUNTED CASH FLOW ANALYSIS(1)
($ IN MILLIONS)
- - - - ------------------------------------------------------------------------------------------------------------------------------------
1998A 1999E 2000P 2001P 2002P 2003P 2004P
--------- --------- --------- --------- --------- --------- ---------
Revenues $25.4 $25.7 $26.6 $28.2 $31.4 $34.1 $34.6
% GROWTH -0.6% 1.1% 3.6% 6.0% 11.2% 8.7% 1.6%
EBITDA $11.1 $11.8 $11.7 $14.0 $16.7 $18.9 $19.1
% MARGIN 43.8% 45.8% 43.8% 49.5% 53.2% 55.5% 55.0%
% GROWTH NA NA NA NA NA NA NA
Depreciation & amortization $3.7 $3.8 $4.4 $4.7 $5.0 $5.1 $5.1
EBIT 7.4 7.9 7.3 9.2 11.7 13.8 14.0
Taxes @ 36.0% (2.7) (2.9) (2.6) (3.3) (4.2) (5.0) (5.0)
--------- --------- --------- --------- --------- --------- ---------
Unleveraged net income $4.7 $5.1 $4.7 $5.9 $7.5 $8.8 $8.9
Plus: Dep. & Amort. $3.7 $3.8 $4.4 $4.7 $5.0 $5.1 $5.1
Less: Capital expenditures (3.8) (10.7) (7.8) (2.5) (1.7) (0.2) 0.0
Change in working capital 1.8 (0.4) 0.0 0.0 0.0 0.0 0.0
--------- --------- --------- --------- --------- --------- ---------
Unleveraged free cash flow $6.5 ($2.7) $0.6 $7.2 $10.5 $13.6 $14.0
========= ========= ========= ========= ========= ========= =========
Adjusted NOI (2) $10.3 $11.0 $10.9 $13.2 $15.9 $18.1 $18.3
- - - - ------------------------------------------------------------------------------------------------------------------------------------
- - - - --------------
(1) Projections based on Sun Management projections dated October 1999, and
assumes a 36.0% tax rate.
(2) Based on the respective years' EBITDA less maintenance capital expenditure
of $0.8 per year.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 64
- - - - -------------------------------------------------------------------------------
HAWAII COMMERCIAL SEGMENT - DISCOUNTED CASH FLOW ANALYSIS (CONT.)(1)
ENTERPRISE VALUE BASED ON 2004P ADJUSTED NOI EXIT MULTIPLES AND DISCOUNT RATES ($ IN MILLIONS)
-------------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
-------------------------------------------------------------------------------
11.00% 11.50% 12.00% 12.50% 13.00%
------------ ------------ ------------ ------------ ------------
2004P EXIT 9.5X 138.8 135.9 133.1 130.3 127.7
MULTIPLE 10.0X 144.4 141.4 138.5 135.6 132.8
10.5X 150.1 146.9 143.9 140.9 138.0
- - - - ----------------------------------------------------------------------------------------------------------------------------------
- - - - -----------------
(1) DCF based upon management projections dated October 1999.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 65
- - - - -------------------------------------------------------------------------------
HAWAII COMMERCIAL SEGMENT - COMPARABLE COMPANIES ANALYSIS
($ IN MILLIONS, EXCEPT PER SHARE DATA)
- - - - -----------------------------------------------------------------------------------------------------------------------------
STOCK PRICE EQUITY ENTERPRISE ENTERPRISE VALUE / EBITDA(2)
-------------------------------- -------
COMPANY 5/12/00(1) VALUE VALUE LTM 2000P 2001P LTM
- - - - -------------------------------- ------------ --------- ------------ --------- ---------- -------- -------
OFFICE
Brandywine Realty Trust $18.00 $741.2 $1,708.0 9.5x 9.4x 8.6x 7.4x
Corporate Office Properties 8.81 259.4 712.5 12.8x 9.6x 8.9x 8.2x
Highwoods Properties Inc 23.50 1,620.8 3,749.9 9.7x 10.0x 9.7x 6.8x
Keystone Property Trust Corp 13.06 212.2 815.9 13.0x 10.5x 9.9x 7.3x
Koger Equity Inc 17.94 509.0 860.5 9.7x 9.5x 7.7x 7.7x
Mack Cali Realty Corp 27.25 1,841.9 3,323.4 9.3x 8.6x 8.0x 8.2x
Parkway Properties Inc 30.25 97.1 671.5 10.8x 9.9x 9.2x 8.3x
Prime Group Realty Trust 15.56 407.0 1,324.6 12.0x 8.6x NA 7.6x
PS Business Parks 24.88 805.3 823.1 9.1x NA NA 10.2x
--------------------------------------------------------------------------------------------------------
HIGH 13.0x 10.5x 9.9x 8.3x
HARMONIC MEAN(4) 10.7x 9.5x 8.8x 7.7x
LOW 9.1x 8.6x 7.7x 6.8x
--------------------------------------------------------------------------------------------------------
RETAIL
- - - - ------
Center Trust $6.69 $192.9 $979.3 10.5x 11.5x 13.5x 4.5x
Kimco Realty Corp 40.56 2,487.4 4,041.2 13.6x 11.9x 10.8x 11.2x
Kranzco Realty Trust 9.19 97.1 534.4 9.6x 7.6x 6.9x 4.9x
Pan Pacific Retail Properties 20.00 425.2 781.4 10.3x 9.3x 8.4x 8.7x
--------------------------------------------------------------------------------------------------------
HIGH 13.6x 11.9x 13.5x 11.2x
HARMONIC MEAN(4) 10.8x 9.7x 9.3x 6.3x
LOW 9.6x 7.6x 6.9x 4.5x
--------------------------------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------------------------------------------------
HIGH 13.6x 11.9x 13.5x 11.2x
HARMONIC MEAN(4) 10.6x 9.5x 9.0x 7.3x
LOW 9.1x 7.6x 6.9x 4.5x
- - - - --------------------------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------
P/FFO(3) PRICE /
------------------------
COMPANY 2000P 2001P BOOK
- - - - ------------------------------- ------------- --------- -------------
OFFICE
- - - - ------
Brandywine Realty Trust 6.9x 6.4x 1.1x
Corporate Office Properties 7.4x 6.9x 1.4x
Highwoods Properties Inc 6.3x 5.9x 1.1x
Keystone Property Trust Corp 7.0x 6.6x 1.1x
Koger Equity Inc 7.3x 6.7x 1.1x
Mack Cali Realty Corp 7.7x 7.2x 1.3x
Parkway Properties Inc 7.7x 6.9x 1.2x
Prime Group Realty Trust 7.5x 6.9x 1.2x
PS Business Parks 9.1x 8.3x 1.5x
--------------------------------------------------------
HIGH 7.7x 7.2x 1.4x
HARMONIC MEAN(4) 7.2x 6.7x 1.2x
LOW 6.3x 5.9x 1.1x
--------------------------------------------------------
RETAIL
- - - - ------
Center Trust 5.1x 4.9x 0.7x
Kimco Realty Corp 10.1x 9.2x 1.6x
Kranzco Realty Trust 4.3x NA 0.6x
Pan Pacific Retail Properties 8.0x 7.4x 1.1x
--------------------------------------------------------
HIGH 10.1x 9.2x 1.6x
HARMONIC MEAN(4) 6.1x 6.7x 0.8x
LOW 4.3x 4.9x 0.6x
--------------------------------------------------------
- - - - -------------------------------------------------------------------------
HIGH 10.1x 9.2x 1.6x
HARMONIC MEAN(4) 6.9x 6.8x 1.1x
LOW 4.3x 4.9x 0.6x
- - - - -------------------------------------------------------------------------
- - - - ----------------
(1) Arithmetic mean shown for Price / Book data.
(2) Estimates per Wall Street research, where available.
(3) Estimates per First Call consensus.
(4) Arithmetic mean shown for Price / Book data.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 66
- - - - -------------------------------------------------------------------------------
HAWAII COMMERCIAL SEGMENT - M&A COMPARABLE TRANSACTIONS ANALYSIS
($ IN MILLIONS)
- - - - ----------------------------------------------------------------------------------------------------------------------
EQUITY AGGREGATE
DATE DATE PURCHASE PURCHASE
ANNOUNCED EFFECTIVE TARGET / ACQUIRER PRICE PRICE PREMIUM
- - - - --------------- -------------- ------------------------------------------- ------------- ------------- --------------
RETAIL
- - - - ------
5/29/98 8/6/98 Mid-America Realty Investments $87.19 $148.6 3.7%
Bradley Real Estate Inc
11/13/97 6/15/98 Horizon Group, Inc. $388.8 $933.5 -1.9%
Prime Retail, Inc.
8/25/97 12/17/97 Arbor Property Trust $102.3 $227.2 6.5%
Vornado Realty Trust
3/26/96 8/9/96 DeBartolo Realty Corp. $1,490.4 $2,937.4 27.5%
Simon Property Group Inc.
10/30/95 3/15/96 Tucker Properties Corp. $105.5 $273.5 -16.9%
Bradley Real Estate Inc.
3/14/95 7/14/95 McArthur/Glen Realty Corp. $315.4 $522.1 -1.0%
Horizon Outlet Centers Inc.
-----------------------------------------------------------------------------------------------------
HIGH 27.5%
HARMONIC MEAN(1) 3.0%
LOW -16.9%
-----------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------
ENTERPRISE VALUE / LTM
DATE DATE ---------------------- EQUITY VALUE/
ANNOUNCED EFFECTIVE TARGET / ACQUIRER EBITDA EBIT LTM FFO
- - - - -------------- -------------- ------------------------------------------- ----------- -------- -------------
RETAIL
- - - - ------
5/29/98 8/6/98 Mid-America Realty Investments 10.5 x 16.3 x 10.1 x
Bradley Real Estate Inc
11/13/97 6/15/98 Horizon Group, Inc. 9.6 x 17.3 x 7.8 x
Prime Retail, Inc.
8/25/97 12/17/97 Arbor Property Trust 12.2 x 15.9 x 10.9 x
Vornado Realty Trust
3/26/96 8/9/96 DeBartolo Realty Corp. 13.2 x 31.5 x 9.1 x
Simon Property Group Inc.
10/30/95 3/15/96 Tucker Properties Corp. 9.5 x 15.8 x 6.9 x
Bradley Real Estate Inc.
3/14/95 7/14/95 McArthur/Glen Realty Corp. 12.2 x 23.4 x 10.3 x
Horizon Outlet Centers Inc.
-------------------------------------------------------------------------------------------------------
HIGH 13.2x 31.5x 10.9x
HARMONIC MEAN(1) 11.1x 18.8x 8.9x
LOW 9.5x 15.8x 6.9x
-------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------
- - - - ---------------
(1) Arithmetic mean shown for premia data.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 67
HAWAII COMMERCIAL SEGMENT - M&A COMPARABLE TRANSACTIONS ANALYSIS (CONT.)
($ IN MILLIONS)
- - - - ----------------------------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------------------------
EQUITY AGGREGATE ENTERPRISE VALUE/LTM
DATE DATE PURCHASE PURCHASE -------------------- EQUITY VALUE/
ANNOUNCED EFFECTIVE TARGET / ACQUIRER PRICE PRICE PREMIUM EBITDA EBIT LTM FFO
- - - - ----------- --------- ------------------------------- ---------- ----------- --------- --------- -------- -------------
OFFICE
- - - - ------
9/8/97 10/14/97 Shidler Group-Mid-Atlantic $170.00 $253.0 NA 18.5 x 24.3 x 4.3 x
Royale Investments Inc.
9/15/97 12/19/97 Beacon Properties Corp. $3,006.8 $4,040.6 30.8% 24.4 x 35.9 x 23.8 x
Equity Office Properties Trust
4/29/96 9/23/96 Crocker Realty Trust Inc. $297.9 $532.4 14.8% 15.2 x 20.7 x 19.4 x
Highwoods Properties Inc.
---------------------------------------------------------------------------------------------------------------------
HIGH 30.8% 24.4x 35.9x 23.8x
HARMONIC 22.8% 18.7x 25.6x 9.1x
MEAN(1)
LOW 14.8% 15.2x 20.7x 4.3x
---------------------------------------------------------------------------------------------------------------------
REIT LBO/MBO
- - - - ------------
12/2/98 6/8/99 Irvine Apartment Communities $1,542.3 $2,528.6 25.6% 18.3x 23.9x 13.5x
TIC Acquisition L.L.C.
3/4/99 10/15/99 Berkshire Realty Co. Inc. $574.4 $1,292.8 29.5% 12.6x 14.9x 9.7x
Aptco L.L.C.
4/5/99 11/22/99 SunStone Hotel Investors Inc. $412.5 $907.9 43.8% 11.0x 19.5x 7.2x
SHP Acquisition L.L.C.
6/7/99 NA Burnham Pacific Properties Inc. $459.0 $1,215.0 21.3% 13.1x 19.1x 8.3x
Schottenstein Stores Corp.
9/24/99 2/29/00 Walden Residential Properties Inc. $715.0 $1,538.1 23.2% 10.0x 17.4x 9.0x
Oly Hightop
---------------------------------------------------------------------------------------------------------------------
HIGH 43.8% 18.3x 23.9x 13.5x
HARMONIC 28.7% 12.5x 18.5x 9.1x
MEAN(1)
- - - - ---------------------------------------------------------------------------------
CONFIDENTIAL 68
LOW 21.3% 10.0x 14.9x 7.2x
---------------------------------------------------------------------------------------------------------------------
- - - - ---------------
(1) Arithmetic mean shown for premia data.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 69
HAWAII COMMERCIAL SEGMENT - M&A COMPARABLE TRANSACTIONS ANALYSIS (CONT.)
($ IN MILLIONS)
- - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - -----------------------------------------------------------------------------------------------------------------------------------
EQUITY AGGREGATE ENTERPRISE VALUE/LTM
DATE DATE PURCHASE PURCHASE -------------------- EQUITY VALUE/
ANNOUNCED EFFECTIVE TARGET / ACQUIRER PRICE PRICE PREMIUM EBITDA EBIT LTM FFO
- - - - ---------- --------- ------------------------------- ---------- ----------- --------- --------- -------- -------------
MULTI-FAMILY/APARTMENT COMMUNITIES
- - - - ----------------------------------
7/8/98 10/20/98 Merry Land & Investment Co Inc. $983.52 $2,024.9 4.2% 13.7 x 20.9 x 8.7 x
Equity Residential Properties Trust
3/9/98 6/3/98 Avalon Properties Inc. $946.03 $1,445.5 -2.9% 13.8 x 19.1 x 10.8 x
Bay Apartment Communities Inc.
12/2/98 6/8/99 Irvine Apartment Communities $634.37 $1,554.1 20.5% 12.3 x 16.9 x 6.5 x
Irvine Co
12/23/97 5/8/98 Ambassador Apartments, Inc. $267.5 $666.0 5.0% 13.9 x 23.2 x 12.7 x
Apartment Investment and Management Co.
12/17/97 4/8/98 Oasis Residential, Inc. $397.2 $943.1 9.8% 13.4 x 18.5 x 8.5 x
Camden Property Trust
8/28/97 12/23/97 Evans Withycombe Residential, Inc. $632.2 $1,063.2 18.9% 15.1 x 22.9 x 15.4 x
Equity Residential Properties Trust
8/4/97 12/24/97 Columbus Realty Trust $340.9 $567.8 4.5% 16.8 x 26.6 x 14.2 x
Post Properties, Inc.
1/16/97 5/30/97 Wellsford Residential Property Trust $467.2 $946.4 7.9% 13.0 x 20.4 x 6.4 x
Equity Residential Properties Trust
12/16/96 5/15/97 Paragon Group Inc. $327.5 $611.4 13.7% 11.5 x 17.7 x NA
Camden Property Trust
10/1/96 12/31/96 South West Property Trust inc. $347.8 $560.3 25.5% 13.1 x 13.6 x 11.4 x
United Dominion Realty Trust Inc.
7/18/96 2/12/97 ROC Communities Inc. $347.4 $486.9 17.5% 15.2 x 24.6 x 14.0 x
Chateau Properties Inc.
10/12/95 3/15/96 Real Estate Investment Trust of California $189.4 $271.5 21.7% 12.2 x 16.2 x 12.4 x
BRE Properties
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 70
HAWAII COMMERCIAL SEGMENT - M&A COMPARABLE TRANSACTIONS ANALYSIS (CONT.)
($ IN MILLIONS)
- - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - -----------------------------------------------------------------------------------------------------------------------------------
EQUITY AGGREGATE ENTERPRISE VALUE/LTM
DATE DATE PURCHASE PURCHASE -------------------- EQUITY VALUE/
ANNOUNCED EFFECTIVE TARGET / ACQUIRER PRICE PRICE PREMIUM EBITDA EBIT LTM FFO
- - - - ---------- --------- ----------------------------------------- ---------- ----------- --------- --------- -------- -------------
MULTI-FAMILY/APARTMENT COMMUNITIES (CONT.)
- - - - ------------------------------------------
2/27/95 6/29/95 America First Real Estate Investment Trust $54.9 $101.8 40.8% 15.6 x 31.5 x 14.0 x
Mid-America Apartment Communities Inc.
8/3/94 12/13/94 Holly Residential Properties Inc. $119.8 $243.1 29.0% 13.4 x 18.9 x 11.6 x
Wellsford Residential Property Trust
12/7/94 3/23/95 Security Capital Pacific Trust $138.7 $232.2 -0.8% 2.9 x 4.0 x 2.1 x
Property Trust of America
-------------------------------------------------------------------------------------------------------------------------
HIGH 40.8% 16.8x 31.5x 15.4x
HARMONIC 14.4% 11.0x 15.7x 8.1x
MEAN(1)
LOW -2.9% 2.9x 4.0x 2.1x
-------------------------------------------------------------------------------------------------------------------------
OTHER
- - - - -----
6/17/94 9/30/94 Health Equity Properties Inc. $160.6 $177.1 13.8% 8.6 x 12.6 x 9.0 x
Omega Healthcare Investors Inc.
4/26/95 6/19/96 Copley Properties Inc. $47.2 $101.9 127.3% 11.8 x 20.1 x 10.1 x
EastGroup Properties
10/31/96 7/1/97 Bay Meadows/California Jockey Club $190.2 $181.8 66.0% 18.5 x 22.5 x 19.3 x
Patriot American Hospitality Inc.
-------------------------------------------------------------------------------------------------------------------------
HIGH 127.3% 18.5x 22.5x 19.3x
HARMONIC MEAN(1) 69.0% 11.7x 17.3x 11.4x
LOW 13.8% 8.6x 12.6x 9.0x
-------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
HIGH 127.3% 24.4x 35.9x 23.8x
HARMONIC MEAN(1) 20.3% 11.7x 17.4x 8.8x
LOW -16.9% 2.9x 4.0x 2.1x
===================================================================================================================================
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 71
- - - - ----------------
(1) Arithmetic mean shown for premia data.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 72
HAWAII COMMERCIAL SEGMENT - SUMMARY VALUATION
($ IN MILLIONS)
- - - - --------------------------------------------------------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------------------------------------------------------
RELEVANT ENTERPRISE VALUE/RELEVANT EBITDA MULTIPLE ENTERPRISE VALUE
SEGMENT ----------------------------------------- --------------------------------
EBITDA LOW MEAN HIGH LOW MEAN HIGH
-------- --------- ----------- ----------- --------- -------- --------
DISCOUNTED CASH FLOW ANALYSIS(1) (2) $11.7 11.0x 11.9x 12.9x $127.7 $138.5 $150.1
COMPARABLE COMPANY ANALYSIS(2) $11.7 7.6x 9.5x 11.9x $88.6 $110.7 $138.7
M&A COMPARABLE TRANSACTION ANALYSIS(3) $11.8 8.6x 11.7x 18.5x $101.1 $137.5 $217.4
- - - - ------------------
(1) Assuming discount rates of 11.0%, 12.0% and 13.0% and 2004P Adjusted NOI
exit multiples of 9.5x, 10.0x and 10.5x.
(2) Enterprise Value based on 2000P EBITDA.
(3) Enterprise Value based upon LTM EBITDA and LTM EBITDA Multiples. Excludes
EBITDA multiples from Beacon Properties (24.4x) and Security Capital
acquisitions (2.9x).
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 73
HAWAII COMMERCIAL SEGMENT - IMPLIED VALUE MATRIX
($ IN MILLIONS)
- - - - ------------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------------
INDICATIVE VALUE RANGE COMPARABLE COMPARABLE
----------------------------- COMPANIES TRANSACTIONS
$110.0 $115.0 $120.0 RANGE RANGE
-------- -------- --------- ------------ ---------------
Indicative Value Multiple
1999 EBITDA $11.8 9.4x 9.8x 10.2x 9.3x-12.8x 8.6x-18.5x
2000E EBITDA $11.7 9.4x 9.9x 10.3x 8.6x-11.5x NA
2001E EBITDA $14.0 7.9x 8.2x 8.6x 7.7x-10.8x NA
Indicative Value Multiple
1999 EBIT $7.9 13.8x 14.5x 15.1x 13.5x-32.6x 12.6x-31.5x
2000E EBIT $7.3 15.1x 15.8x 16.5x 10.8x-23.4x NA
2001E EBIT $9.2 11.9x 12.5x 13.0x 9.8x-19.4x NA
Indicative Value Multiple
1999 Adjusted NOI(3) $11.0 10.0x 10.5x 11.0x NA NA
2000E Adjusted NOI(3) $10.9 10.1x 10.6x 11.1x NA NA
2001E Adjusted NOI(3) $13.2 8.4x 8.7x 9.1x NA NA
Indicative Value / Real Estate & PPE of Segment(2) $211.7 0.5x 0.5x 0.6x 0.7x-1.5x NA
- - - - ------------------------------------------------------------------------------------------------------------------------------
- - - - --------------
(1) Ranges derived from Hawaii Commercial Segment Comparable Companies Analysis
and Comparable Transaction Analysis, as applicable, excluding outliers.
(2) Book value as of December 31, 1999.
(3) Adjusted NOI based on the respective years EBITDA less $0.8 million in
maintenance capex
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 74
SECTION 5-E
LANA'I SEGMENT
LANA'I SEGMENT - OVERVIEW
- - - - -------------------------------------------------------------------------------------------------------
Size of Lana'I 90,500 acres(1)
Developable Land
Urban Classified Land 3,228 acres(2)
Rural Classified Land 2,397 acres(2)
Undevelopable Land
Conservation Classified Land 38,197 acres(2)
Agricultural Classified Land 46,678 acres(2)
Sun Ownership 88,000 acres (97%)(1)
Resort Development
Koele 632 acres(1)
Manele Bay 868 acres(1)
Commercial Properties and Support Services 113,000 sq. ft.(1)
- - - - ---------------------------------------------------------------------- --------------------------------
- - - - - Extremely long-term asset with limited near-term cash flows
- - - - - Book value of $230 million reflects historical cost
- Company has enormously underperformed relative to its expectations
at the time development began
- - - - - An Appraisal results in a different value for the asset than using a
discounted cash flow methodology
- The Hallstrom Appraisal resulted in a valuation of $160.0 million
based upon the most probable price, to a single buyer, which the
property should bring in a competitive and open market under all
conditions requisite to a fair sale, of which $55.0 million is
attributable to undeveloped land and $105.0 million is attributable
to Lana'i City properties, hotels and golf course assets, and
project districts (surrounding resort development land)
- Substantial uncertainty exists as to whether a buyer could be found
- - - - - Approximate value of this asset is therefore difficult to determine
- - - - - This asset could be valued as a sale or charitable contribution, which may
provide tax benefits to the Company
- - - - - The estimated value for Lana'i is between $60 - $160 million. The low end
valuation is based upon a discounted cash flow analysis and the high end
valuation is based upon the Appraisal.
- - - - --------------
(1) Sun 10-K dated March 31, 2000.
(2) Classification by Hawaii State Land Use Commission, per Sun 10-K dated March
31, 2000.
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 75
LANA'I SEGMENT - OVERVIEW (CONT.)
- - - - - We viewed the Lana'i Segment as one business comprised of the resorts,
homebuilding and amenities
RESORTS
- - - - - Luxury resorts have attractive profile but also have not generated
positive cash flow
- - - - - New marketing relationship with Starwood is not yielding results
- - - - - Koele resort is a "Vermont-like" settlement which has been less attractive
to Hawaii visitors
- - - - - Management forecasts assume an increase in occupancy rates
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 76
LANA'I SEGMENT - OVERVIEW (CONT.)
HOMEBUILDING / LOT SALES
- - - - - Value of the homebuilding operations will be derived primarily from the
Company's ability to sell its existing homesites at attractive prices
- - - - - Visibility of demand for homebuilding products is extremely low
- - - - - Characteristics of home ownership in the Lana'i Resort Segment are
attractive to a relatively small demographic segment of the population
- Limited amenities other than golf courses and sport shooting
- No cultural attractions
- Extremely limited shopping
- Small airport unable to handle trans-oceanic commercial jets
- Other than Company employees, few permanent residents to make
friends with
- - - - - Company has engaged in speculative homebuilding for certain of its single
and multifamily homes
- - - - - Management is expecting an increase in lot sales aboeve historical
results
- - - - - A third party interested in acquiring the Lana'i Resort Segment would most
likely question the long term viability of a strategy for the island that
included the sale of homesites
- - - - - Homebuilding operations have been and are projected to be cash flow
negative for the near term
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 77
- - - - -------------------------------------------------------------------------------
LANA'I SEGMENT - OVERVIEW (CONT.)
HOMEBUILDING / LOT SALES (CONT.)
- Ability to value homebuilding operations as a high-multiple ongoing
business is low due to slow velocity of historical unit sales and long
term viability of segment
- Villas at Koele (multifamily units): Sale price range of $500,000 to
$1,000,000(1)
- Luxury single family homes at Koele (completed house and lot): Sale
price range of $800,000 to $2,500,000(1)
- Terraces at Manele Bay (multifamily units): Sale price range of
$800,000 to $2,100,000(1)
- Single family lots at Manele Bay: Sale price range of $650,000 to
$3,200,000(1)
(1) Sun 10-K dated December 31, 2000
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 78
- - - - -------------------------------------------------------------------------------
LANA'I SEGMENT - OVERVIEW (CONT.)
UNENTITLED LAND HOLDINGS
- Unentitled agricultural landholdings have limited value and development of
this land is not planned to occur for several decades, if ever
- Entitlement process is cumbersome and there is limited assurance
that unentitled land can be approved for revenue-generating
development
- Restrictions exist on fresh water uses
- Company has been unable to sell existing inventory of home sites;
Uncertain if additional lots could also be sold
- Conservation land holdings have minimal value due to current
classification and very limited development potential
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 79
LANA'I SEGMENT - HISTORICAL AND PROJECTED FINANCIAL RESULTS(1)
REVENUES ($ IN MILLIONS) EBITDA ($ IN MILLIONS)
- - - - ------------------------------------------------------------------- -------------------------------------------------------------
[GRAPH] [GRAPH]
- - - - ------------------------------------------------------------------- -------------------------------------------------------------
UNLEVERAGED FREE CASH FLOW(2) ($ IN MILLIONS) DEVELOPMENT & CAPITAL EXPENDITURES ($ IN MILLIONS)
- - - - ------------------------------------------------------------------- -------------------------------------------------------------
[GRAPH] [GRAPH]
- - - - ------------------------------------------------------------------- -------------------------------------------------------------
- - - - ------------------
(1) Source: Sun Management's historical segment financial data and projections,
prepared in October 1999. 1999 data is estimated, since Management does not
update its model until the next year's projections are prepared.
(2) Assumes tax rate of 36%.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 80
LANA'I SEGMENT - DISCOUNTED CASH FLOW ANALYSIS (1)
($ IN MILLIONS)
- - - - ------------------------------------------------------------------------------------------------------------------------------------
1998A 1999E 2000P 2001P 2002P 2003P 2004P
------- ------- ------- ------- ------- ------- -------
Revenues $72.5 $76.2 $87.0 $89.2 $91.9 $94.7 $97.5
% GROWTH 28.7% 5.1% 14.2% 2.6% 3.0% 3.0% 3.0%
EBITDA ($3.2) ($2.6) $1.4 $1.6 $2.0 $2.5 $3.1
% MARGIN (4.4%) (3.4%) 1.7% 1.7% 2.1% 2.7% 3.2%
% GROWTH NA NM NM 8.3% 25.7% 30.2% 22.9%
Depreciation & amortization $8.2 $7.4 $7.0 $7.0 $7.1 $7.1 $7.2
EBIT (11.4) (10.0) (5.6) (5.4) (5.1) (4.6) (4.1)
Taxes @ 36.0% 4.1 3.6 2.0 2.0 1.8 1.7 1.5
------- ------- ------- ------- ------- ------- -------
Unleveraged net income ($7.3) ($6.4) ($3.6) ($3.5) ($3.3) ($2.9) ($2.6)
Plus: Dep. & Amort. $8.2 $7.4 $7.0 $7.0 $7.1 $7.1 $7.2
Plus: Cost of sales 14.4 15.8 19.5 19.5 19.9 20.3 20.8
Less: Development Expenditures (16.4) (15.2) (14.2) (18.9) (17.6) (12.6) (9.7)
Less: Capital expenditures (4.2) (5.1) (10.0) (10.1) (6.0) (5.0) (5.0)
Change in working capital (0.3) 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Unleveraged free cash flow ($5.6) ($3.5) ($1.3) ($6.1) $0.1 $7.0 $10.7
======= ======= ======= ======= ======= ======= =======
- - - - ----------------
(1) Projections based on Sun Management projections dated October 1999, and
assumes a 36.0% tax rate.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 81
LANA'I SEGMENT - APPRAISAL VALUE
BEAR STEARNS OBTAINED A LIMITED REAL ESTATE APPRAISAL FROM THE HALLSTROM GROUP
FOR THE ISLAND OF LANA'I. (SEE APPENDIX D)
// The Island of Lana'i Appraisal conclusions
- The Hallstrom Appraisal resulted in a valuation of $160.0 million based
upon the most probable price, to a single buyer, which the property
should bring in a competitive and open market under all conditions
requisite to a fair sale, of which $55.0 million is attributable to
undeveloped land and $105.0 million is attributable to Lana'i City
properties, hotels and golf course assets, and project districts
(surrounding resort development land)
- Hallstrom acknowledges "the developed holdings to be currently
underperforming relative to their cost or intrinsic real estate value;
however, our limited appraisal estimates market value based on
underlying asset value"
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 82
LANA'I SEGMENT - REVIEW OF SELECT NON-ECONOMIC TRANSACTIONS
THERE HAVE BEEN A FEW LARGE LAND ACQUISITIONS BY GOVERNMENT AND CHARITABLE
ORGANIZATIONS THAT TIE TO ENVIRONMENTAL RATHER THAN ANY ECONOMIC VALUE. DUE TO
THE UNIQUENESS OF SUCH TRANSACTIONS AND SITUATIONS, TRADITIONAL VALUATION
TECHNIQUES CANNOT BE EMPLOYED. HOWEVER, WHILE NO SUCH OPPORTUNITY CURRENTLY
EXISTS IT IS CONCEIVABLE THAT A GOVERNMENTAL OR ENVIRONMENTAL ENTITY MAY HAVE AN
INTEREST IN ACQUIRING THE ISLAND OF LANA'I. IN ADDITION, THERE IS A POTENTIAL
TROPHY PREMIUM TO UNIQUE PROPERTIES SUCH AS THESE.
($ IN MILLIONS)
- - - - -----------------------------------------------------------------------------------------------------------------------------------
DATE PROPERTY NAME ACRES PRICE BUYER DESCRIPTION OF THE PROPERTY/TRANSACTION
- - - - --------- --------------------- --------- --------- ------------------------------------ ------------------------------------------
5/00 Palmyra Island 15,000 $37.0 The Nature Conservancy An island 1,000 miles south of Hawaii.
Home to migrating birds. 15,000 acres
is composed of 680 acres of dry land
on 52 islands and 14,320 acres of coral
reef.
2/00 Headwaters Forest 10,000 $480.0 State and Federal Government The owner, Pacific Lumber, rejected the
deal. Headwaters Forest is an old
redwood forest located in Humboldt County
2/00 Sterling Forest 2,200 $9.5 State and Environmental Trusts Land adjacent to state park and has a
conference center and limited
infrastructure. The vast majority of the
land is developed.
3/98 Sterling Forest 15,800 $55.0 Charity groups, State and Federal Located 40 miles northwest of New York
Government City, it was acquired to protect a
watershed for the reservoir system
which provides water to two million
people in northern New Jersey.
9/94 Hamakua Sugar 29,883 $21.0 Kamehameha Schools Located on the island of Hawaii. Land
Company Lands was classified as conservation,
agriculture and urban, the vast majority
being agriculture.
- - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 83
LANA'I SEGMENT - DISCOUNTED CASH FLOW ANALYSIS (CONT.) (1)
ENTERPRISE VALUE BASED ON 2004P UNLEVERAGED FREE CASH FLOW EXIT MULTIPLES AND DISCOUNT RATES ($ IN MILLIONS)
--------------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE
----------------------------------------------------------------------------------
11.00% 11.50% 12.00% 12.50% 13.00%
------------ ----------- ---------- ----------- -----------
5.0x $36.7 $35.8 $34.9 $34.1 $33.3
2004P EXIT 5.5x 39.9 38.9 38.0 37.1 36.2
MULTIPLE 6.0x 43.0 42.0 41.0 40.0 39.1
6.5x 46.2 45.1 44.0 43.0 42.0
7.0x 49.4 48.2 47.1 46.0 44.9
--------------------------------------------------------------------------------------------------------------------------------
- - - - ----------------------
(1) DCF based upon Sun Management projections dated October 1999.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 84
LANA'I SEGMENT- COMPARABLE COMPANIES ANALYSIS
($ IN MILLIONS, EXCEPT PER SHARE DATA)
- - - - -----------------------------------------------------------------------------------------------------------------------------------
ENTERPRISE VALUE / EBITDA P/E
STOCK PRICE EQUITY ENTERPRISE -------------------------------- --------------------
COMPANY 5/12/00 VALUE VALUE LTM 2000P 2001P LTM 2000P
- - - - -------------------------------- ------------ --------- ----------- -------- --------- --------- --------- -------
Choice Hotels $12.56 $677.1 $1,058.3 10.4x 9.5x 8.8x 12.2x 10.8x
Four Season Hotels 54.75 1,866.7 1,603.0 24.3x 16.4x 13.9x 32.0x 29.1x
Hilton Hotels 8.06 2,957.3 8,048.9 7.4x 6.5x 6.1x 13.9x 12.2x
Marriott Intl Inc 34.75 8,837.1 9,887.0 11.1x 9.5x 8.4x 21.7x 18.6x
Prime Hospitality 8.44 402.4 944.2 5.3x 5.7x 5.9x 8.0x 7.3x
Starwood Hotels &Resorts 28.06 5,350.7 10,925.0 8.2x 7.1x 6.7x 18.2x 15.1x
- - - - ----------------------------------------------------------------------------------------------------------------------------------
MAXIMUM 24.3x 16.4x 13.9x 32.0x 29.1x
HARMONIC MEAN(1) 8.9x 8.1x 7.6x 14.6x 12.9x
MINIMUM 5.3x 5.7x 5.9x 8.0x 7.3x
- - - - ----------------------------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------------------------
PRICE /
COMPANY 2001P BOOK
- - - - -------------------------------- ------- --------
Choice Hotels 9.7x 10.3x
Four Season Hotels 24.3x NA
Hilton Hotels 10.8x 2.1x
Marriott Intl Inc 16.1x 3.1x
Prime Hospitality 6.6x 0.6x
Starwood Hotels &Resorts 12.9x 1.5x
- - - - -------------------------------------------------------
MAXIMUM 24.3x 10.3x
HARMONIC MEAN(1) 11.4x 1.6x
MINIMUM 6.6x 0.6x
- - - - -------------------------------------------------------
- - - - -------------------------------------------------------
- - - - ------------------
(1) Arithmetic mean shown for Price / Book data.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 85
1 PROJECT SUN
- - - - -------------------------------------------------------------------------------
LANA'I SEGMENT - M&A COMPARABLE TRANSACTIONS ANALYSIS
($ IN MILLIONS)
- - - - ------------------------------------------------------------------------------------------------------------------------------------
EQUITY VALUE
EQUITY AGGREGATE ENTERPRISE VALUE / LTM ------------
DATE DATE PURCHASE PURCHASE ---------------------- LTM
ANNOUNCED EFFECTIVE TARGET / ACQUIRER PRICE PRICE PREMIUM EBITDA EBIT NET INCOME
- - - - ---------- ----------- ---------------------------------- ----------- ----------- ---------- ------------- ---------- ------------
09/07/99 12/02/99 Promus Hotel Corp / $3,126.6 $4,086.9 49.9% 9.7x 12.0x 17.0x
Hilton Hotels
02/18/97 03/29/97 Renaissance Hotel Group / $956.6 $1,010.1 17.1% 14.9x 16.8x 26.6x
Marriott International
04/14/97 12/31/97 Wyndham Hotel Corp. / $1,126.2 $1,256.9 30.1% 32.6x 42.6x 45.9x
Patriot American Hospitality Inc.
09/03/97 12/18/97 Doubletree / $1,655.5 $2,152.3 NM 11.4x 15.4x 25.7x
Promus Hotel Corp
09/09/97 1/5/98 Westin Hotels / $782.1 $1,812.1 NM 15.6x 26.2x 34.3x
Starwood Lodging Trust
10/20/97 2/24/98 ITT Corp / $9,956.6 $14,600.6 35.2% 15.3x 22.4x 24.5x
Starwood Lodging Trust
12/02/97 04/02/98 Interstate Hotels Corp / $1,351.7 $2,112.4 23.5% 12.2x 16.5x 30.8x
Patriot American Hospitality Inc.
08/28/96 11/08/96 Red Lion Hotels, Inc. / $979.5 $1,174.1 32.1% 15.8x 21.0x 29.9x
Doubletree Corp.
02/21/98 03/27/98 Inter-Continental / $1,395.0 $2,889.0 NM 16.1x 20.1x 12.6x
Bass PLC
------------------------------------------------------------------------------------------------------------
HIGH 49.9% 32.6X 42.6X 45.9X
HARMONIC MEAN(1) 31.3% 14.4X 19.1X 24.2X
LOW 17.1% 9.7X 12.0X 12.6X
------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------------------
- - - - -------------
(1) Arithmetic mean shown for premia data
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 86
1 PROJECT SUN
- - - - -------------------------------------------------------------------------------
LANA'I SEGMENT - SUMMARY VALUATION
- - - - -----------------------------------------------------------------------------------------------------------------------------------
RELEVANT ENTERPRISE VALUE/RELEVANT EBITDA MULTIPLE ENTERPRISE VALUE
SEGMENT ----------------------------------------- -----------------------------------
EBITDA LOW MEAN HIGH LOW MEAN HIGH
-------- ----------- --------- -------- ---------- --------- ---------
DISCOUNTED CASH FLOW ANALYSIS(1) (2) $1.4 23.2x 28.6x 34.4x $33.3 $41.0 $49.4
COMPARABLE COMPANY ANALYSIS(2) $1.4 5.7x 8.1x 16.4x $8.2 $11.6 $23.6
M&A COMPARABLE TRANSACTION ANALYSIS(3) ($2.6) 9.7x 14.4x 32.6x NM NM NM
REAL ESTATE APPRAISAL(4) $160
- - - - -----------------------------------------------------------------------------------------------------------------------------------
- - - - ------------------
(1) Assuming discount rate of 11.0%, 12.0% and 13.0% and a 2004P Unleveraged
Free Cash Flow exit multiple of 5.0x, 6.0x and 7.0x.
(2) Enterprise Value based on 2000P EBITDA.
(3) Enterprise Value based upon LTM EBITDA and LTM EBITDA Multiples.
(4) The Hallstrom Group issued an opinion letter, dated May 18, 2000.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 87
1 -------------------------
SECTION 6
FINANCING CONDITIONS OF THE
FLEXI-VAN OFFER
1 PROJECT SUN
- - - - -------------------------------------------------------------------------------
FINANCING CONDITIONS OF THE FLEXI-VAN OFFER
- - - - - Flexi-Van offer is conditioned upon obtaining financing for the Transaction
- - - - - Deutsche Bank Securities Inc. issued a highly confidential letter that
Flexi-Van can raise the necessary funds
- Deutsche Bank Securities Inc.'s commitment is conditioned upon a number
of factors including market conditions, and there is no guarantee that
Flexi-Van will indeed obtain necessary funds
- Deutsche Bank Securities Inc. has provided a draft commitment letter
dated May 19, 2000, but it has not yet been executed
- - - - - There is no public information on Flexi-Van, but we understand from the
Special Committee that David Murdock and Flexi-Van have the resources to
complete the Transaction
- - - - - As part of the work done to evaluate the feasibility of the offer, we need
to do due diligence on the bidder and become confident of its ability to
close with financing
- Based on discussions with and at the Special Committee's request, Bear
Stearns has not performed any due diligence on Flexi-Van
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 88
1 -------------------------
APPENDICES
1 -------------------------
APPENDIX A
PROPERTY LIST
PROPERTY LIST
RESIDENTIAL PROPERTIES
- - - - ----------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------
Price Points Amt Amt Designated
Property Loc. Units ($000's) Acres Entitled Unentitled Land Use
- - - - ----------------------------- ----- ------ ---------- ------- ---------- ---------- ----------------
HAWAII
- - - - -----------------------------
Mililani Mauka Oahu 2,484 120-440 542 542 -- Urban
Royal Kunia Oahu 914 220-350 186 186 -- Urban
Lalea Oahu 16 220-320 2 2 -- Urban
Mililani Mauka 110Acre Site Oahu -- NA 110 -- 110 Urban
Na Pu'u Nani Oahu 640 NA 255 255 -- Urban
Kipapa Gulch Oahu -- NM 1,600 -- 1,600 Agricultural
Koa Ridge Mauka Oahu -- NM 640 -- 640 Agricultural
Koa Ridge Makai Oahu -- NM 570 -- 570 Agricultural
Waiawa Oahu -- NM 418 -- 418 Agricultural
Waipio West Oahu -- NM 270 -- 270 Agricultural
Mililani South Oahu -- NM 610 -- 610 Agricultural
Whitmore Oahu -- NM 295 -- 295 Agricultural
Waipio Forest/Other Oahu -- NM 5,520 -- 5,520 Conservation
------ ------ ------- -------
TOTAL HAWAII 4,054 11,018 985 10,033
------ ------ ------- -------
------ ------ ------- -------
Price Points Amt Amt Designated
Property Loc. Units ($000's) Acres Entitled Unentitled Land Use
- - - - ----------------------------- ------ ------ ---------- ------- ---------- ---------- ----------------
MAINLAND
- - - - ----------------------------
BAKERSFIELD
Seven Oaks CA 1,757 26-300 1,079 1,079 -- Residential
Silver Creek CA 260 16-22 128 128 -- Residential
Brimhall CA 295 19-80 167 167 -- Residential
Haggin Oaks CA 1 NA 1 1 -- Residential
Campus Park CA 129 NA 23 23 -- Residential
Mission Oaks CA 340 NA 61 61 -- Residential
Renfro CA 327 NA 81 81 -- Residential
Ming & Gosford CA -- NA 31 31 -- Residential
Brimhall bulk land CA -- NA 683 683 -- Residential
Brimhall freeway alignment CA -- NA 100 100 -- Residential
------ ------ -------
3,109 2,354 2,354
------ ------ -------
OTHER CALIFORNIA
Saddle Creek CA 1,059 50-250 668 668 -- Residential
- - - - ----------------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 89
PROPERTY LIST (CONTINUED)
RESIDENTIAL PROPERTIES (CONTINUED)
- - - - ----------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------
Price Points Amt Amt Designated
Property Loc. Units ($000's) Acres Entitled Unentitled Land Use
- - - - ----------------------------- ----- ------ ---------- ------- ---------- ---------- ----------------
OTHER CALIFORNIA (CONTINUED)
Saddle Creek Golf Course CA -- NA 198 NA NA Golf Course
Atascadero CA 3 NA 11 11 -- Residential
Mountaingate CA -- NA 282 -- 282 Residential
San Jose CA -- NA 2,210 -- 2,210 Open Space
Coyote Creek Golf Courses CA -- NA 298 -- NA Golf Course
------ ------ ------- -------
1,062 3,667 679 2,492
------ ------ ------- -------
ORLANDO, FLORIDA
Keene's Pointe FL 400 14-65 250 250 -- Residential
Keene's Pointe Golf Course FL NA NA 240 NA NA Golf Course
------ ------ -------
490 250
------ -------
ARIZONA
Winterhaven AZ 956 14-65 321 321 -- Residential
Sierra Vista Other AZ 47 14-65 686 686 -- Residential
Pueblo del Sol Golf Course AZ NA NA 164 NA NA Golf Course
40 Acre Parcels - Cochise AZ -- NA 366 0 366 Open Space
Unentitled - Sierra Vista AZ -- NA 2,680 0 2,680 Open Space
------ ------ ------- -------
1,003 4,217 1,007 3,046
------ ------ ------- -------
TOTAL MAINLAND 5,574 10,728 4,290 5,538
------ ------ ------- -------
------ ------ ------- -------
- - - - --------------------------------------------------------------------------------------------------------------
COMMERCIAL PROPERTIES
- - - - --------------------------------------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------------------------------------
Property Location Sq. Ft. Acres Designated Land Use
- - - - ----------------------------------- -------------------- --------- -------- ------------------------
HAWAII
- - - - -----------------------------------
OPERATING PROPERTY
Verifone Office Building Mililani, HI 29,000 4 Office
Leilehua Building Mililani, HI 21,000 -- Office
925 Dillingham Office Building Honolulu, HI 55,000 3 Office
801 Dillingham Office Building Honolulu, HI 46,000 2 Office
Home Depot - Iwilei Honolulu, HI 136,000 9 Retail
Dole Center Honolulu, HI 820,000 17 Office/Retail
Dole Plantation Retail Visitor
Center Wahiawa, HI 11,000 7 Agricultural
Town Center of Mililani Mililani, HI 442,000 41 Retail
--------- ---------
1,560,000 83
--------- ---------
- - - - --------------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 90
PROPERTY LIST (CONTINUED)
COMMERCIAL PROPERTIES (CONTINUED)
- - - - --------------------------------------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------------------------------------
Property Location Sq. Ft. Acres Designated Land Use
- - - - --------------------------------- --------------------- ---------- ---------- -------------------------
UNDEVELOPED LANDHOLDINGS (CONT.)
Mililani Mauka Commercial Mililani, HI 24 Urban
Mililani Technology Park Mililani, HI 226 Urban
Pine Spur Wahiawa, HI 163 Agricultural
Dole Plantation Wahiawa, HI 243 Agricultural
Other Iwilei Honolulu, HI 14 Urban
----------
670
----------
TOTAL HAWAII 1,560,000 753
--------- ----------
MAINLAND
- - - - ---------------------------------
OPERATING PROPERTY
Ming Avenue Office Building Bakersfield, CA 214,000 19 Office
One Riverwalk Office Building Bakersfield, CA 73,000 5 Office
The Marketplace Shopping Center Bakersfield, CA 300,000 33 Retail
Schirra Court Industrial Warehouse Bakersfield, CA 150,000 8 Industrial
Harvel Warehouse Bakersfield, CA 100,000 8 Industrial
Premier Plaza Office Buildings Atlanta, GA 188,000 8 Office
Landmark Center Office Buildings Raleigh, NC 166,000 7 Office
Horizon at Six Forks Office Raleigh, NC 109,050 12 Office
Buildings
Falls of the Neuse Office Building Raleigh, NC 173,000 10 Office
Regents Center Office Buildings Tempe, AZ 105,000 9 Office
One Norman Square Apartments Cornelius, NC 22 Multi Family
C&C Carrier Hotels Orlando, FL 9 Industrial
Prime Outlets Lake Elsinore, CA 368,000 43 Retail
Kirby Canyon San Jose, CA 760 Landfill
--------- ----------
1,946,050 953
UNDEVELOPED LANDHOLDINGS
Stockdale Industrial Park Bakersfield, CA 310 Industrial
Gateway Industrial Park Bakersfield, CA 71 Industrial
Silver Creek Commercial Bakersfield, CA 34 Commercial
Stockdale Highway Bakersfield, CA 74 Commercial
Highway 99 @ Bear Mountain Bakersfield, CA 42 Commercial
SRP Project Tempe, AZ 15 Industrial
Camarillo Camarillo, CA 5 Commercial
- - - - --------------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 91
PROPERTY LIST (CONTINUED)
COMMERCIAL PROPERTIES (CONTINUED)
- - - - --------------------------------------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------------------------------------
Property Location Sq. Ft. Acres Designated Land Use
- - - - --------------------------------- --------------------- ---------- ---------- -------------------------
UNDEVELOPED LANDHOLDINGS (CONT.)
Paso Robles Paso Robles, CA 9 Commercial
Lindero Canyon Westlake Village, CA 20 Commercial
Lake Elsinore Lake Elsinore, CA 84 Commercial
Lake Elsinore Open Space Lake Elsinore, CA 122 Open Space
Mountaingate Los Angeles, CA 67 Landfill
----------
853
----------
TOTAL MAINLAND 1,946,050 1,806
--------- ----------
TOTAL COMMERCIAL 3,506,050 2,559
--------- ----------
--------- ----------
- - - - --------------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 92
PROPERTY LIST (CONTINUED)
LANA'I
- - - - -------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------
DESCRIPTION
----------------------------------------------
RESORTS
- - - - ------------------------------
The Manele Bay Hotel Opened in 1991, this 249-room luxury oceanfront
resort features a 12,000 sq. ft. conference
center, tennis and pro shop, spa, three
restaurants, retail shop, salon, and Nicklaus
designed championship golf course, with
clubhouse, retail shop, and restaurant. This
resort was; ranked #38 in 1999 Conde Nast
Traveler's Gold List of "Best Places to Stay
in the Whole World."
The Lodge at Koele Opened in 1990, this 102-room luxury hotel in
the wooded highlands includes tennis, stables,
fitness center, two restaurants, retail shop,
and gardens, as well as a Greg Norman-designed
championship golf course, with clubhouse, pro
shop, and restaurant. This resort was ranked
#4 in the world in 1999 Conde Nast Traveler
Reader's Choice Poll for "50 Best Gold
Resorts."
RESORT DEVELOPMENTS
- - - - ------------------------------
The Koele Project Luxury vacation home project; 88 proposed multi
family units on 18.5 acres, and 255 proposed
single family units on 138 acres
Villas at Koele Multi family units, 1,360 to 2,660 sq. ft.,
from $500,000 to $1,000,000; 11 closings from
12/94 to 12/99, three completed unsold units,
and four units under construction
Manele Bay Project 94 proposed multi family units on 33.4 acres
and 166 proposed single family home sites on
145 acres; Single family lots from $650,000 to
$3,200,000
Terraces at Manele Bay Multi family units, 1,560 to 3,200 sq. ft.,
from $800,000 to $2,100,000; 3 closings of
single family homesites and 18 closings of
Terrace units from 12/96 to 12/99
OTHER PROJECTS
- - - - ------------------------------
Lana'i City Residential 250 proposed single family, plantation style
homes; 780 to 1,344 sq. ft., from $115,000 to
Real Estate Project $260,000; 37 plantation style homes completed,
26 sales closed and 5 sales under contract as
of 12/31/99
COMMERCIAL PROPERTIES AND 113,000 sq. ft. of improved commercial lease
SUPPORT SERVICES space within Lana'i City; water company to
- - - - ------------------------------ provide water services; motor vehicles used to
transport resort guests and employees
- - - - --------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------
CONFIDENTIAL 93
APPENDIX B
WEIGHTED AVERAGE COST OF CAPITAL
COMPARABLE COMPANIES AFTER-TAX COST OF CAPITAL
==================================================================================================================================
LEVERED NET EQUITY DEBT/ UNLEVERED TOTAL
HOME BUILDERS TICKER BETA (1) DEBT VALUE (2) EQUITY TAX RATE BETA CAP
- - - - ----------------------------------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- ---------
Schuler Homes Inc SHLR 0.27 $236.8 $118.0 201% 36.0% 0.12 $354.8
Pulte Corp PHM 0.85 739.9 991.5 75% 36.0% 0.58 1,731.4
D R Horton Inc DHI 1.12 1,236.1 889.7 139% 36.0% 0.59 2,125.8
Standard Pacific Cp SPF 0.83 335.7 320.9 105% 36.0% 0.50 656.5
Kaufman & Broad Home Corp KBH 1.14 1,251.6 792.5 158% 36.0% 0.57 2,044.1
Beazer Homes Usa Inc BZH 0.72 273.5 179.0 153% 36.0% 0.36 452.5
Centex Corp CTX 0.93 1,806.6 1,435.0 126% 36.0% 0.52 3,241.6
Webb (Del E) Corp WBB 0.77 1,092.3 271.5 402% 36.0% 0.22 1,363.8
Lennar Corp LEN 1.17 750.2 921.9 81% 36.0% 0.77 1,672.1
Toll Brothers Inc TOL 0.73 741.9 797.2 93% 36.0% 0.46 1,539.1
LAND DEVELOPMENT
Catellus Development Corp CDX 0.70 $875.6 $1,520.0 58% 36.0% 0.51 $2,395.5
Newhall Land &Farm -Lp NHL 0.48 222.8 833.8 27% 36.0% 0.41 1,056.6
Avatar Holdings Inc AVTR 0.74 119.5 172.3 69% 36.0% 0.51 291.8
HOME BUILDER & LAND DEVELOPMENT
- - - - ----------------------------------------------------------------------------------------------------------------------------------
HIGH 1.17 402.4% 0.77
75 PERCENTILE 0.93 152.8% 0.57
MEAN 0.80 129.7% 0.47
25 PERCENTILE 0.72 74.6% 0.41
LOW 0.27 26.7% 0.12
- - - - ----------------------------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------------------------
=============================================================
COST OF
HOME BUILDERS WEIGHTED EQUITY (3)
- - - - ----------------------------------- ------------ -----------
Schuler Homes Inc $42.0 8.1%
Pulte Corp 996.0 12.3%
D R Horton Inc 1,260.3 14.2%
Standard Pacific Cp 326.4 12.1%
Kaufman & Broad Home Corp 1,158.9 14.4%
Beazer Homes Usa Inc 164.8 11.3%
Centex Corp 1,669.5 12.8%
Webb (Del E) Corp 293.7 11.7%
Lennar Corp 1,286.4 14.6%
Toll Brothers Inc 704.1 11.4%
LAND DEVELOPMENT
Catellus Development Corp $1,225.2 11.2%
Newhall Land &Farm -Lp 433.1 9.6%
Avatar Holdings Inc 149.6 11.5%
HOME BUILDER & LAND DEVELOPMENT
- - - - -------------------------------------------------------------
HIGH 14.6%
75 PERCENTILE 12.8%
MEAN 0.51 11.9%
25 PERCENTILE 11.3%
LOW 8.1%
- - - - -------------------------------------------------------------
- - - - -------------------------------------------------------------
- - - - ------------------
(1) Source: Bloomberg, May 12, 2000
(2) Equity Value as of May 12, 2000
(3) Assumes risk free rate of 6.1% and equity risk premium of 7.25%.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 94
COMPARABLE COMPANIES AFTER-TAX COST OF CAPITAL (CONT.)
==================================================================================================================================
LEVERED EQUITY DEBT/ UNLEVERED TOTAL
COMMERCIAL REAL ESTATE TICKER BETA (1) DEBT VALUE (2) EQUITY TAX RATE BETA CAP
- - - - ---------------------------------- ----------- ------------ ----------- ----------- ---------- ----------- ------------ ----------
Corp Office Pptys Tr Inc OFC 0.67 $399.6 $259.4 154% 36.0% 0.34 $659.0
Prime Group Realty Trust PGE 0.62 799.2 407.0 196% 36.0% 0.27 1,206.1
Ps Business Parks PSB 0.52 37.1 805.3 5% 36.0% 0.51 842.4
Keystone Property Trust Corp KTR 0.47 522.1 212.2 246% 36.0% 0.18 734.3
Brandywine Realty Trust BDN 0.43 839.6 741.2 113% 36.0% 0.25 1,580.9
Mack Cali Realty Corp CLI 0.58 1,490.2 1,841.9 81% 36.0% 0.38 3,332.1
Highwoods Properties Inc HIW 0.57 1,766.1 1,620.8 109% 36.0% 0.34 3,386.9
Koger Equity Inc KE 0.56 351.5 509.0 69% 36.0% 0.39 860.5
Parkway Properties Inc PKY 0.46 301.4 97.1 310% 36.0% 0.15 398.5
Kranzco Realty Trust KRT 0.51 353.2 97.1 364% 36.0% 0.15 450.3
Kimco Realty Corp KIM 0.50 1,249.6 2,487.4 50% 36.0% 0.38 3,737.0
Pan Pac Retail Pptys Inc PNP 0.55 357.3 425.2 84% 36.0% 0.36 782.5
Center Tr Inc CTA 0.69 791.6 192.9 410% 36.0% 0.19 984.5
COMMERCIAL REAL ESTATE
- - - - ----------------------------------------------------------------------------------------------------------------------------------
High 0.69 410.4% 0.51
75 Percentile 0.58 246.1% 0.38
Mean 0.49 241.5% 0.23
25 Percentile 0.50 80.9% 0.19
Low 0.43 4.6% 0.15
- - - - ----------------------------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------------------------
===========================================================
COST OF
COMMERCIAL REAL ESTATE WEIGHTED EQUITY (3)
- - - - ---------------------------------- ----------- -----------
Corp Office Pptys Tr Inc $222.3 11.0%
Prime Group Realty Trust 331.4 10.6%
Ps Business Parks 425.5 9.9%
Keystone Property Trust Corp 134.0 9.5%
Brandywine Realty Trust 394.1 9.2%
Mack Cali Realty Corp 1,273.3 10.3%
Highwoods Properties Inc 1,137.4 10.2%
Koger Equity Inc 334.2 10.2%
Parkway Properties Inc 61.4 9.4%
Kranzco Realty Trust 69.0 9.8%
Kimco Realty Corp 1,413.9 9.7%
Pan Pac Retail Pptys Inc 279.9 10.1%
Center Tr Inc 187.3 11.1%
COMMERCIAL REAL ESTATE
- - - - ------------------------------------------------------------
High 11.1%
75 Percentile 10.3%
Mean 0.33 9.7%
25 Percentile 9.7%
Low 9.2%
- - - - ------------------------------------------------------------
- - - - ------------------------------------------------------------
- - - - --------------------
(1) Source: Bloomberg, May 12, 2000
(2) Equity Value as of May 12, 2000
(3) Assumes risk free rate of 6.1% and equity risk premium of 7.25%.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 95
COMPARABLE COMPANIES AFTER-TAX COST OF CAPITAL (CONT.)
=================================================================================================================================
LEVERED EQUITY DEBT/ UNLEVERED TOTAL
RESORTS TICKER BETA (1) DEBT VALUE (2) EQUITY TAX RATE BETA CAP
- - - - -------------------------------- ----------- ----------- ----------- ----------- ------------ ----------- ---------- ------------
Starwood Hotels & Resorts HOT 0.99 $5,549.0 $5,350.7 104% 36.0% 0.60 $10,899.7
Marriott Intl Inc MAR 1.01 1,614.0 8,837.1 18% 36.0% 0.90 10,451.1
Hilton Hotels Corp HLT 0.93 5,339.0 2,957.3 181% 36.0% 0.43 8,296.3
Choice Hotels Intl Inc CHH 0.53 307.4 677.1 45% 36.0% 0.41 984.4
Prime Hospitality Corp PDQ 1.07 549.0 402.4 136% 36.0% 0.57 951.4
Four Season Hotels FS 0.96 122.9 1,866.7 7% 36.0% 0.92 1,989.6
RESORTS
- - - - ---------------------------------------------------------------------------------------------------------------------------------
High 1.07 180.5% 0.92
75 Percentile 1.01 128.3% 0.83
Mean 0.92 81.8% 0.64
25 Percentile 0.94 25.0% 0.47
Low 0.53 6.6% 0.41
- - - - ---------------------------------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------------------------------
==========================================================
COST OF
RESORTS WEIGHTED EQUITY (3)
- - - - -------------------------------- ------------ -----------
Starwood Hotels & Resorts $6,485.9 13.3%
Marriott Intl Inc 9,450.9 13.4%
Hilton Hotels Corp 3,579.6 12.8%
Choice Hotels Intl Inc 404.3 9.9%
Prime Hospitality Corp 543.4 13.9%
Four Season Hotels 1,832.8 13.1%
RESORTS
- - - - ----------------------------------------------------------
High 13.9%
75 Percentile 13.4%
Mean 0.66 12.7%
25 Percentile 12.9%
Low 9.9%
- - - - ----------------------------------------------------------
- - - - ----------------------------------------------------------
- - - - ---------------------
(1) Source: Bloomberg, May 12, 2000
(2) Equity Value as of May 12, 2000
(3) Assumes risk free rate of 6.1% and equity risk premium of 7.25%.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 96
SUN'S WEIGHT AVERAGE COST OF CAPITAL
===============================================================================================================================
UNLEVERED EQUITY DEBT/ LEVERED COST OF
SUN SEGMENTS BETA DEBT VALUE (1) EQUITY TAX RATE BETA EQUITY (2)
- - - - ----------------------------------- ----------- ----------- ----------- ------------ ----------- ----------- -----------
COMMERCIAL
High 0.51 $274.5 $317.9 86.3% 36.0% 0.78 11.78%
75 Percentile 0.38 274.5 317.9 86.3% 36.0% 0.59 10.36%
Mean 0.23 274.5 317.9 86.3% 36.0% 0.35 8.67%
25 Percentile 0.19 274.5 317.9 86.3% 36.0% 0.30 8.24%
Low 0.15 274.5 317.9 86.3% 36.0% 0.24 7.82%
Weighted 0.33 $274.5 $317.9 86.3% 36.0% 0.51 9.82%
HOME BUILDERS & LAND DEVELOPMENT
High 0.77 $274.5 $317.9 86.3% 36.0% 1.19 14.76%
75 Percentile 0.57 274.5 317.9 86.3% 36.0% 0.88 12.48%
Mean 0.47 274.5 317.9 86.3% 36.0% 0.73 11.38%
25 Percentile 0.41 274.5 317.9 86.3% 36.0% 0.64 10.71%
Low 0.12 274.5 317.9 86.3% 36.0% 0.18 7.43%
Weighted 0.51 $274.5 $317.9 86.3% 36.0% 0.80 11.87%
LANA'I (RESORTS)
High 0.92 $274.5 $317.9 86.3% 36.0% 1.43 16.47%
75 Percentile 0.83 274.5 317.9 86.3% 36.0% 1.28 15.41%
Mean 0.64 274.5 317.9 86.3% 36.0% 0.99 13.29%
25 Percentile 0.47 274.5 317.9 86.3% 36.0% 0.72 11.35%
Low 0.41 274.5 317.9 86.3% 36.0% 0.64 10.72%
Weighted 0.66 $274.5 $317.9 86.3% 36.0% 1.03 13.57%
Sun - Market Beta(4) 1.00 $274.5 $317.9 86.3% 36.0% 1.55 17.40%
Sun - 25% Hurdle Rate (5) $274.5 $317.9 86.3% 36.0% 0.00 16.00%
- - - - -------------------------------------------------------------------------------------------------------------------------------
=====================================================================
COST OF
SUN SEGMENTS DEBT (3) WACC
- - - - ----------------------------------- ------------ -----------
COMMERCIAL
High 9.00% 9.0%
75 Percentile 9.00% 8.2%
Mean 9.00% 7.3%
25 Percentile 9.00% 7.1%
Low 9.00% 6.9%
Weighted 9.00% 7.9%
HOME BUILDERS & LAND DEVELOPMENT
High 9.00% 10.6%
75 Percentile 9.00% 9.4%
Mean 9.00% 8.8%
25 Percentile 9.00% 8.4%
Low 9.00% 6.7%
Weighted 9.00% 9.0%
LANA'I (RESORTS)
High 9.00% 11.5%
75 Percentile 9.00% 10.9%
Mean 9.00% 9.8%
25 Percentile 9.00% 8.8%
Low 9.00% 8.4%
Weighted 9.00% 10.0%
Sun - Market Beta(4) 9.00% 12.0%
Sun - 25% Hurdle Rate (5) 9.00% 11.3%
- - - - ---------------------------------------------------------------------
- - - - ---------------------
(1) Equity Value based on $18.50 per share revised offer price.
(2) Assumes risk free rate of 6.1% and equity risk premium of 7.25%.
(3) Based on Company's floating rate debt and estimated new fixed rate debt
(4) Assuming unlevered beta equals market beta
(5) Cost of Equity based on pretax equity returns of 25.0%.
- - - - --------------------------------------------------------------------------------
CONFIDENTIAL 97
APPENDIX C
REVIEW OF DISCUSSIONS WITH OTHER POTENTIAL BUYERS
APPENDIX D
REAL ESTATE APPRAISAL LETTER
APPENDIX D
[THE HALLSTROM GROUP INC. LETTERHEAD]
May 18, 2000
Mr. Stephan Peers
Bear Stearns & Co., Inc.
1999 Avenue of the Stars, 32nd Floor
Los Angeles, California 90067-6100
LIMITED APPRAISAL OF SELECTED
CASTLE & COOKE, INC. PROPERTIES
Dear Mr. Peers:
At your request, we have completed a limited market value appraisal of the
fee simple interests in selected Hawaii real property assets of Castle &
Cooke, Inc. comprising approximately 87,827 acres on the island of Lanai, and
10,072 acres of essentially undeveloped Oahu lands. These holdings are more
specifically identified on Table 1 (Lanai) and Table 2 (Oahu). All are owned
by Castle & Cooke, Inc. or its subsidiaries.
SCOPE OF ASSIGNMENT
Our conclusions are subject to the limiting conditions and assumptions stated
later in the report. The assignment is limited in that the depth of research
and analysis is less than that of a complete study. This constitutes
invoking an allowed departure of the Uniform Standards of Professional
Appraisal Practice (USPAP) Standards Rules 1-3(a) and 1-4(a)(b). We have been
asked to provide a restricted appraisal report for internal use by the
client. It is intended to comply with the reporting requirements set forth
under Standards
Mr. Stephan Peers
May 18, 2000
Page 2
Rule 2-2(c) of USPAP. The depth of discussion contained in this report is
specific to your needs and for the intended use stated below.
INTENDED USE OF REPORT
It is our understanding that Bear Stearns & Co., Inc. acting as financial
advisor to the Special Committee of the Board of Directors of Castle & Cooke,
Inc. regarding possible disposition of a significant portion of company
stock. The intended use of this study is to provide real estate value
estimates to assist in your evaluation.
PURPOSE OF THE APPRAISAL
The purpose of this study is to estimate overall fee simple market values for
both the Lanai and selected Oahu properties to single purchasers, and not the
individual worth of the separate land parcels, development projects, or
operating properties.
Market value is defined as the most probable price which a property should
bring in a competitive and open market under all conditions requisite to a
fair sale, the buyer and seller, each acting prudently, knowledgeably and
assuming the price is not affected by undue stimulus. Implicit in this
definition is the consummation of a sale as of a specified date and the
passing of title from seller to buyer under conditions whereby:
- - - - - buyer and seller typically motivated;
- - - - - both parties are well informed or well advised, and acting in what they
consider their best interests;
- - - - - a reasonable time allowed for exposure in the open market;
Mr. Stephan Peers
May 18, 2000
Page 3
- - - - - payment made in terms of cash in United States dollars or in terms of
financial arrangements comparable thereto; and
- - - - - the price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale.
INTERESTED VALUE
The interests valued in this study are the fee simple interests in both the
Lanai and selected Oahu subject properties to a single purchaser.
EFFECTIVE DATE OF VALUATION
The effective date of valuation is May 15, 2000.
APPRAISAL DEVELOPMENT AND REPORTING PROCESS
In preparing this limited appraisal, we have:
- - - - - reviewed various maps delineating the subject holdings, including
Hawaii Tax Maps, entitlement maps, topographic maps, master plans,
phasing maps, architectural plans, and floor plans;
- - - - - inspected portions of the subject properties;
- - - - - consulted with various staff members of Castle & Cooke, Inc. and its
subsidiaries for insight into historic and projected uses and
operations of the subject properties, their effective market areas, and
advantages and limitations which affect their existing and future use
potentials and ability to be competitive within the marketplace;
Mr. Stephan Peers
May 18, 2000
Page 4
- - - - - examined Castle & Cooke provided operating statements, performance
reports, marketing information, assessment records, and selected
consulting studies
- - - - - analyzed sales of resort, commercial, agricultural, conservation,
industrial and residential properties on neighbor islands within the
State of Hawaii; and reviewed sales of islands elsewhere in the world
for comparison with the Lanai properties;
- - - - - examined sales of agriculture and conservation zoned properties on Oahu
for comparison with the selected Oahu subject holdings; and
- - - - - based on accumulated market information, analyzed subject holdings to
conclude value estimates.
HIGHEST AND BEST USE
The highest and best use(s) of the Lanai properties vary based on physical
considerations and entitlement status. A large majority of the island is
classified as conservation (40,709 acres) and agriculture (33,357 for pasture
and open space and approximately 12,000 acres for potentially more intensive
agriculture uses). Two project districts, Manele and Koele, comprising a
total of 1,486 acres, each contain a hotel and golf course, and lands that
have been and are anticipated to be developed for single-family, multi-family
and related resort support or ancillary uses. Lanai City contains improved and
vacant residential, industrial, commercial and open spaces uses for its
almost 3,000 residents. Other portions of the island are developed for
auxiliary purposes. These uses are deemed to be consistent with the property's
highest and best use.
The highest and best use of the selected Oahu properties are conservation
(5,520 acres) or agriculture (4,552 acres), with certain of the agriculture
holdings having some urban potential over the next five to 20-plus years.
Mr. Stephan Peers
May 18, 2000
Page 5
VALUATION METHODOLOGY
We have employed sales comparison, income capitalization, subdivision
development (discounted cash flow which analyzes the land's development
potential), and depreciated cost valuation methodologies. The most prominent
has been the sales comparison approach as it forms baselines for most of the
other approaches. It is based on the principal of substitution, i.e., the
value of a property is governed by the prices generally obtained for other
similar properties, the value of land is best measured by prices generally
obtained for similar properties within the immediate area. In analyzing
market data, it is imperative that the sales prices be reduced to common
denominators to relate the degree of comparability to the property under
appraisal. In this limited appraisal, we have reviewed overall price trends
in the effective market areas. Unlike a complete appraisal process, specific
transactions were not selected for comparison to the subject properties, and
therefore specific adjustments for differences were not completed.
FEE SIMPLE VALUE CONCLUSION FOR LANAI PROPERTIES
Based on the above data and analyses, it is our opinion on May 15, 2000,
subject to the limiting conditions and assumptions contained herein, that the
fee simple market value of the Lanai subject property is $160,000,000; of
which $55,000,000 is attributable to undeveloped land, and $105,000,000 to
Lanai City properties, hotel and golf course assets, and the project
districts (surrounding resort development lands).
We acknowledge the developed holdings to be currently underperforming
relative to their cost or intrinsic real estate value; however, our limited
appraisal estimates market value based on underlying asset value.
Mr. Stephan Peers
May 18, 2000
Page 6
FEE SIMPLE VALUE CONCLUSION FOR OAHU PROPERTIES
Based on the above data and analyses, it is also our opinion on May 15,
2000, subject to the limiting conditions and assumptions contained herein,
that the market value of the selected Oahu subject holdings is $45,000,000.
REASONABLE EXPOSURE TIME
The reasonable exposure time for these properties are estimated to be three
years.
LIMITING CONDITIONS AND ASSUMPTIONS
The research, analysis, and conclusions for valuation or market studies,
performed by The Hallstrom Group, Inc., are subject to and influenced by the
following:
- - - - - The report expresses the opinion of the signers as of the date stated in
the letter of transmittal, and in no way has been contingent upon the
reporting of specified values or findings. It is based upon the then
present condition of the national and local economy and the then
purchasing power of the dollar.
- - - - - Legal descriptions used within the report are taken from official
documents recorded with the State of Hawaii, Bureau of Conveyances, or
have been furnished by the client, and are assumed to be correct. No
survey is made for purposes of the report.
- - - - - Any sketches, maps, plot plans, and photographs included in the report
are intended only to show spatial relationships and/or assist the reader
in visualizing the property. They are not measured surveys or maps and we
are not responsible for their accuracy or interpretive quality.
Mr. Stephan Peers
May 18, 2000
Page 7
- - - - - It is assumed that the subject property is free and clear of any and all
encumbrances other than those referred to herein, and no responsibility
is assumed for matters of a legal nature. The report is not to be
construed as rendering any opinion of title, which is assumed to be good
and marketable. No title information or data regarding easements which
might adversely affect the use, access, or development of the property,
other than that referenced in the report, was found or provided. The
property is analyzed as though under responsible ownership and competent
management.
- - - - - Any architectural plans and/or specifications examined assume completion
of the improvements in general conformance with those documents in a
timely and workmanlike manner.
- - - - - Preparation for, attendance, or testimony at any court or administrative
hearing in connection with this report shall not be required unless
prior arrangements have been made therefor.
- - - - - If the report contains an allocation of value between land and
improvements, such allocation applies only under the existing program of
utilization. The separate valuations for land and building must not be used
in conjunction with any other purpose and are invalid if so used.
- - - - - If the report contains a valuation relating to a geographical portion or
tract of real estate, the value reported for such geographical portion
relates to such portion only and should not be construed as applying with
equal validity to other portions of the larger parcel or tract; and the
value reported for such geographical portion plus the value of all other
geographical portions may or may not equal the value of the entire parcel
or tract considered as an entity.
Mr. Stephan Peers
May 18, 2000
Page 8
- - - - - If the report contains a valuation relating to an estate in land that is
less than the whole fee simple estate, the value reported for such estate
relates to a fractional interest only in the real estate involved, and
the value of this fractional interest plus the value of all other
fractional interest may or may not equal to the value of the entire fee
simple estate considered as a whole.
- - - - - It is assumed that there are no hidden or inapparent conditions of the
property, subsoil, or structures which would render it more or less
valuable; we assume no responsibility for such conditions or for
engineering which might be required to discover such factors.
- - - - - Nothing in the report should be deemed a certification or guaranty as to
the structural and/or mechanical (electrical, heating, air-conditioning,
and plumbing) soundness of the building(s) and associated mechanical
systems, unless otherwise noted.
- - - - - Information, estimates, and opinions provided by third parties and
contained in this report were obtained from sources considered reliable
and believed to be true and correct. However, no responsibility is
assumed for possible misinformation.
- - - - - Possession of the report, or a copy thereof, does not carry with it the
right of publication, and the report may not be used by any person or
organization except the client without the previous written consent of
the appraiser, and then only in its entirety.
- - - - - Disclosure of the contents of this report is governed by the By-Laws and
Regulations of the Appraisal Institute. Neither all nor any part of the
contents of this report (especially any conclusions as to value, the
identity of the appraisers or the firm which they are connected, or any
reference to the Appraisal Institute or to the MAI designation) shall be
disseminated to the public through advertising media, public relations
media, news media, sales media, or any public means of communication
Mr. Stephen Peers
May 18, 2000
Page 9
without the prior consent and approval of the appraisers. We
understand and agree that reference to our report may be made by you in
your advice and opinion to the Special Committee, and that our report
may be included in materials filed with governmental agencies in
connection with this matter.
- - - - - Unless otherwise stated in this report, the existence of hazardous
material, which may or may not be present on the property, was not
observed by the appraiser. The appraiser has no knowledge of the
existence of such materials on or in the property. The appraiser,
however, is not qualified to detect such substances. The presence of
substances such as asbestos, urea-formaldehyde foam insulation, or
other potentially hazardous materials may affect the value of the
property. The value estimate is predicated on the assumption that
there is no such material on or in the property that would cause a loss
in value. No responsibility is assumed for any such conditions, or for
any expertise or engineering knowledge required to discover them. The
client is urged to retain an expert in this field, if desired.
- - - - - The Americans with Disabilities Act (ADA) became effective January 26,
1992. We have not made a specific compliance survey and analysis of
this property to determine whether or not it is in conformity with the
various detailed requirement of the ADA. It is possible that a
compliance survey together with a detailed analysis of the requirements
of the ADA could reveal that the property is not in compliance with one
or more of the requirements of the act. If so, this fact could have a
negative effect upon the value of the property. We did not consider
possible noncompliance with the requirements of ADA in estimating the
value of the property.
- - - - - It is assumed that the single buyer of the Lanai property will honor
all existing leases, contractual agreements, fulfill all entitlement
contingencies, the formal memorandums with Lanaians for Sensible Growth
and subsequent agreements, and maintain all support facilities and
infrastructure (i.e., the water company, sewage
Mr. Stephen Peers
May 18, 2000
Page 10
treatment plants, game management, public landscaping and community
support programs) to the same extent and level of obligation as Castle
and Cooke, Inc. and its related companies.
CERTIFICATION
The undersigned do hereby certify that, to the best of our knowledge and
belief, the statements of fact contained in this report are true and correct.
It is further certified that the report, analyses, opinions, and conclusions
are limited only by the reported assumptions and limiting conditions, and are
our personal, impartial, and unbiased professional analyses, opinions, and
conclusions. We further certify that we have no present or prospective
interest in the property that is the subject of this report, and have no
personal interest with respect to the parties involved. We have no bias with
respect to the property or the parties involved with this assignment. Our
engagement was not contingent upon developing or reporting predetermined
results. Our compensation is not contingent on a predetermined value or
direction in value that favors the cause of the client, the amount of the
value opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of this appraisal. The
appraisal analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the requirements of the Code of
Professional Ethics and Standards of Professional Appraisal Practice of the
Appraisal Institute, and the Uniform Standards of Professional Appraisal
Practice. The use of this report is subject to the requirements of the
Appraisal Institute relating to review by duly authorized representatives.
James E. Hallstrom, Jr. certifies that he has made a current personal
inspection of portions of the Lanai properties. Donald L. Hallstrom did not
currently inspect the Lanai properties, nor did either James E. Hallstrom,
Jr. or Donald L. Hallstrom currently inspect the Oahu properties.
Previously, most of the Lanai holdings and some of the Oahu properties have
been inspected by James E. Hallstrom, Jr. and/or Donald L. Hallstrom. No
persons provided significant professional assistance other than the
undersigned.
Mr. Stephen Peers
May 18, 2000
Page 11
The Appraisal Institute conducts programs of continuing education for their
designated members. As of the date of this report, James E. Hallstrom, Jr.
has completed the requirements of the continuing education program of the
Appraisal Institute.
THE HALLSTROM GROUP, INC.
/s/ James E. Hallstrom, Jr.
- - - - ----------------------------------
James E. Hallstrom, Jr., MAI, CRE
Hawaii State Certified
General Appraiser, CGA-178
Exp. Date December 31, 2001
/s/ Donald L. Hallstrom
- - - - ----------------------------------
Donald L. Hallstrom, CRE
Hawaii State Certified
General Appraiser, CGA-81
Exp. Date December 31, 2001
/as
[THE HALLSTROM GROUP INC. LETTERHEAD]
PROFESSIONAL BACKGROUND AND SERVICES
The Hallstrom Group, Inc. is a Honolulu based independent professional
organization that provides a wide scope of real estate consulting services
throughout the State of Hawaii with particular emphasis on valuation studies.
The purpose of the firm is to assist clients in formulating realistic real
estate decisions. It provides solutions to complex issues by delivering
thoroughly researched, objective analyses in a timely manner. Focusing on
specific client problems and needs, and employing a broad range of tools
including after-tax cash flow simulations and feasibility analyses, the firm
minimizes the financial risks inherent in the real estate decision making
process.
The principals and associates of the firm have been professionally trained,
are experienced in Hawaiian real estate, and are actively associated with the
Appraisal Institute and the Counselors of Real Estate nationally recognized
real estate appraisal and counseling organizations.
The real estate appraisals prepared by The Hallstrom Group accomplish a
variety of needs and function to provide professional value opinions for such
purposes as mortgage loans, investment decisions, lease negotiations and
arbitrations, condemnations, assessment appeals, and the formation of policy
decisions. Valuation assignments cover a spectrum of property types including
existing and proposed resort and residential developments, industrial
properties, high-rise office buildings and condominiums, shopping centers,
subdivisions, apartments, residential leased fee conversions, special purpose
properties, and vacant acreage, as well as property assemblages and portfolio
reviews.
Market studies are research-intensive, analytical tools oriented to provided
insight into investment opportunities and development challenges, and range
in focus from highest and best use determinations for a specific site or
improved property to an evaluation of multiple (present and future) demand
and supply characteristics for long-term, mixed-use projects. Market studies
are commissioned for a variety of purposes where timely market information,
insightful trends analyses, and perceptive conceptual conclusions or
recommendations are critical. Uses include the formation of development
strategies, bases for capital commitment decisions, evidence of
appropriateness for state and county land use classification petitions,
fiscal and social impact evaluations, and the identification of alternative
economic use/conversion opportunities.
TABLE 1
SUMMARY OF LAND INVENTORY
CASTLE & COOKE, INC.'S LANAI PROPERTIES
Second Division Land Area Existing Assessment
Tax Map Key in Acres Use Classification
- - - - --------------- --------- -------------------
4-9-01-021 0.632 Conservation
4-9-01-024 12.553 Imp Res/Cons
4-9-01-025 5.683 Unimproved Residential
4-9-01-027 1.151 Improved Residential
4-9-01-030 0.606 Improved Residential
4-9-02-001 86.074.576 Imp Res/Comm/Ind/Ag/cons/Unimp Res
4-9-02-053 0.388 Industrial
4-9-02-054 3.525 Improved Residential
4-9-02-055 (1) Commercial
4-9-02-055 (1) Commercial
4-9-03-026 2.148 Improved Residential
4-9-04-001 0.241 Improved Residential
4-9-04-014 0.149 Improved Residential
4-9-04-024 0.058 Improved Residential
4-9-04-040 0.072 Improved Residential
4-9-04-048 0.098 Improved Residential
4-9-04-050 0.143 Improved Residential
4-9-04-051 2.665 Apartment
4-9-04-056 0.073 Improved Residential
4-9-04-077 0.066 Improved Residential
4-9-04-081 0.123 Improved Residential
4-9-04-082 0.157 Improved Residential
4-9-04-083 0.217 Improved Residential
4-9-04-084 1.941 Apartment
4-9-04-085 0.070 Improved Residential
4-9-04-086 0.075 Improved Residential
4-9-04-087 0.075 Improved Residential
4-9-04-088 0.072 Improved Residential
4-9-04-089 0.075 Improved Residential
4-9-04-090 0.075 Improved Residential
4-9-04-091 0.088 Improved Residential
4-9-04-092 0.068 Improved Residential
4-9-04-093 0.068 Improved Residential
4-9-04-094 0.073 Improved Residential
4-9-04-095 0.072 Improved Residential
4-9-04-097 0.123 Improved Residential
4-9-04-098 0.067 Improved Residential
4-9-04-099 0.067 Improved Residential
4-9-04-100 0.155 Improved Residential
4-9-04-101 0.155 Improved Residential
4-9-04-102 0.073 Improved Residential
4-9-04-103 0.060 Improved Residential
4-9-04-104 0.075 Improved Residential
4-9-04-105 0.101 Improved Residential
4-9-04-106 0.079 Improved Residential
4-9-04-107 0.079 Improved Residential
4-9-04-108 0.079 Improved Residential
4-9-04-109 0.079 Improved Residential
4-9-05-020 0.065 Improved Residential
4-9-05-031 0.064 Improved Residential
4-9-05-042 0.066 Improved Residential
4-9-05-047 0.069 Improved Residential
4-9-05-052 0.132 Improved Residential
4-9-05-063 0.142 Improved Residential
4-9-05-071 0.078 Improved Residential
4-9-05-074 0.067 Improved Residential
Page 1
TABLE 1 (continued)
SUMMARY OF LAND INVENTORY
CASTLE & COOKE, INC.'S LANAI PROPERTIES
Second Division Land Area Existing Assessment
Tax Map Key in Acres Use Classification
--------------- --------- -------------------
4-9-05-080 0.366 Improved Residential
4-9-05-088 0.070 Improved Residential
4-9-05-090 7.001 Industrial
4-9-05-093 0.069 Improved Residential
4-9-05-094 0.067 Improved Residential
4-9-05-095 0.067 Improved Residential
4-9-05-096 0.067 Improved Residential
4-9-05-097 0.073 Improved Residential
4-9-05-098 0.074 Improved Residential
4-9-05-099 0.083 Improved Residential
4-9-05-100 0.068 Improved Residential
4-9-05-101 0.068 Improved Residential
4-9-05-102 0.077 Improved Residential
4-9-05-103 0.066 Improved Residential
4-9-05-104 0.075 Improved Residential
4-9-05-105 0.096 Improved Residential
4-9-05-106 0.069 Improved Residential
4-9-05-107 0.108 Improved Residential
4-9-05-108 0.132 Improved Residential
4-9-05-109 0.132 Improved Residential
4-9-05-110 0.146 Improved Residential
4-9-05-111 0.146 Improved Residential
4-9-05-112 0.070 Improved Residential
4-9-05-113 0.072 Improved Residential
4-9-05-114 0.072 Improved Residential
4-9-05-115 0.072 Improved Residential
4-9-05-116 0.088 Improved Residential
4-9-05-117 0.068 Improved Residential
4-9-06-003 0.685 Commercial
4-9-06-005 3.277 Improved Residential
4-9-06-006 0.340 Improved Residential
4-9-06-007 0.686 Improved Residential
4-9-06-010 0.622 Apartment
4-9-06-011 0.984 Apt/Comm
4-9-06-015 0.984 Commercial
4-9-06-021 1.025 Commercial
4-9-06-026 1.025 Commercial
4-9-06-028 0.341 Improved Residential
4-9-06-031 0.340 Commercial
4-9-06-033 1.033 Improved Residential
4-9-06-034 0.836 Commercial
4-9-06-042 0.984 Commercial
4-9-06-043 2.517 Commercial
4-9-06-049 0.242 Commercial
4-9-06-050 0.513 Improved Residential
4-9-06-054 0.323 Commercial
4-9-06-055 0.297 Commercial
4-9-06-057 0.172 Improved Residential
4-9-06-059 0.168 Improved Residential
4-9-06-060 0.256 Improved Residential
4-9-06-061 0.256 Improved Residential
4-9-06-062 0.063 Apartment
4-9-06-064 0.324 Commercial
4-9-07-006 0.136 Improved Residential
4-9-07-025 0.946 Improved Residential
4-9-07-034 0.058 Improved Residential
4-9-07-038 0.075 Improved Residential
Page 2
TABLE 1 (CONTINUED)
SUMMARY OF LAND INVENTORY
CASTLE & COOKE, INC.'S LANAI PROPERTIES
Second Division Land Area Existing Assessment
Tax Map Key In Acres Use Classification
--------------- --------- -------------------
4-9-07-040 0.272 Improved Residential
4-9-07-041 0.094 Improved Residential
4-9-07-045 0.455 Improved Residential
4-9-07-054 0.140 Improved Residential
4-9-07-080 0.136 Improved Residential
4-9-07-095 0.266 Improved Residential
4-9-07-097 0.163 Improved Residential
4-9-07-101 0.068 Improved Residential
4-9-07-102 0.354 Improved Residential
4-9-07-107 0.070 Improved Residential
4-9-07-112 0.068 Improved Residential
4-9-07-125 0.075 Improved Residential
4-9-07-131 0.072 Improved Residential
4-9-07-139 0.920 Improved Residential
4-9-07-146 0.074 Improved Residential
4-9-07-147 0.082 Improved Residential
4-9-07-148 0.102 Improved Residential
4-9-07-149 0.163 Improved Residential
4-9-07-150 0.132 Improved Residential
4-9-07-151 0.091 Improved Residential
4-9-07-152 0.180 Improved Residential
4-9-07-153 0.072 Improved Residential
4-9-07-154 0.072 Improved Residential
4-9-07-155 0.072 Improved Residential
4-9-07-156 0.073 Improved Residential
4-9-07-157 0.073 Improved Residential
4-9-07-158 0.073 Improved Residential
4-9-07-159 0.076 Improved Residential
4-9-07-160 0.073 Improved Residential
4-9-07-161 0.076 Improved Residential
4-9-07-162 0.071 Improved Residential
4-9-07-163 0.072 Improved Residential
4-9-07-164 0.069 Improved Residential
4-9-08-001 0.138 Improved Residential
4-9-08-012 0.186 Improved Residential
4-9-08-013 9.125 Apartment
4-9-08-036 0.477 Apartment
4-9-08-018 0.165 Improved Residential
4-9-08-019 0.313 Improved Residential
4-9-08-029 0.124 Improved Residential
4-9-08-035 0.124 Improved Residential
4-9-08-037 0.201 Improved Residential
4-9-08-038 0.161 Improved Residential
4-9-08-039 0.139 Improved Residential
4-9-08-040 0.076 Improved Residential
4-9-08-041 0.075 Improved Residential
4-9-08-042 0.070 Improved Residential
4-9-08-043 0.142 Improved Residential
4-9-08-044 0.096 Improved Residential
4-9-08-045 0.072 Improved Residential
4-9-08-046 0.075 Improved Residential
4-9-08-047 0.102 Improved Residential
4-9-08-048 3.264 Unimproved Residential
4-9-08-049 0.120 Improved Residential
4-9-09-007 0.038 Improved Residential
4-9-09-036 0.101 Improved Residential
4-9-09-043 0.151 Conservation
Page 3
Table 1 (continued)
SUMMARY OF LAND INVENTORY
Castle & Cooke, Inc.'s Lanai Properties
Second Division Land Area Existing Assessment
Tax Map Key in Acres Use Classification
--------------- --------- -------------------
4-9-10-001 0.154 Improved Residential
4-9-10-028 0.148 Improved Residential
4-9-10-047 1.393 Improved Residential
4-9-10-061 0.661 Improved Residential
4-9-10-066 0.064 Improved Residential
4-9-10-067 0.062 Improved Residential
4-9-10-068 0.055 Improved Residential
4-9-10-069 0.072 Improved Residential
4-9-10-070 0.063 Improved Residential
4-9-10-071 0.066 Improved Residential
4-9-10-072 0.069 Improved Residential
4-9-10-073 0.061 Improved Residential
4-9-10-074 0.076 Improved Residential
4-9-10-075 0.067 Improved Residential
4-9-11-001 7.851 Comm/Cons/Hotel & Resort
4-9-11-003 0.430 Commercial
4-9-11-005 0.293 Improved Residential
4-9-11-008 0.379 Improved Residential
4-9-11-015 0.258 Improved Residential
4-9-11-018 0.330 Commercial
4-9-11-019 0.241 Improved Residential
4-9-11-020 0.491 Improved Residential
4-9-11-021 0.303 Improved Residential
4-9-12-001 1.234 Impr Res/Comm
4-9-12-003 0.346 Improved Residential
4-9-12-005 0.073 Improved Residential
4-9-12-025 0.091 Improved Residential
4-9-12-030 0.293 Improved Residential
4-9-12-031 0.138 Improved Residential
4-9-12-035 0.076 Improved Residential
4-9-12-043 0.071 Improved Residential
4-9-12-057 0.074 Improved Residential
4-9-12-059 0.067 Improved Residential
4-9-12-064 0.065 Improved Residential
4-9-12-065 0.091 Improved Residential
4-9-12-066 0.087 Improved Residential
4-9-12-067 0.125 Improved Residential
4-9-12-068 0.053 Improved Residential
4-9-12-069 0.059 Improved Residential
4-9-12-070 0.071 Improved Residential
4-9-12-071 0.076 Improved Residential
4-9-12-072 0.076 Improved Residential
4-9-12-073 0.076 Improved Residential
4-9-12-074 0.107 Improved Residential
4-9-12-075 0.125 Improved Residential
4-9-12-077 0.121 Improved Residential
4-9-12-078 0.104 Improved Residential
4-9-12-079 0.069 Improved Residential
4-9-13-005 0.061 Improved Residential
4-9-13-008 0.068 Improved Residential
4-9-13-009 0.113 Improved Residential
4-9-13-015 0.087 Improved Residential
4-9-13-034 0.708 Improved Residential
4-9-13-036 0.062 Improved Residential
4-9-13-043 0.063 Improved Residential
4-9-13-045 0.068 Improved Residential
4-9-13-066 0.072 Improved Residential
Page 4
Table 1 (continued)
SUMMARY OF LAND INVENTORY
Castle & Cooke, Inc.'s Lanai Properties
Second Division Land Area Existing Assessment
Tax Map Key in Acres Use Classification
--------------- --------- -------------------
4-9-13-071 0.067 Improved Residential
4-9-13-073 0.225 Improved Residential
4-9-13-080 0.125 Improved Residential
4-9-13-082 0.094 Improved Residential
4-9-13-083 0.103 Improved Residential
4-9-13-084 0.074 Improved Residential
4-9-13-085 0.076 Improved Residential
4-9-13-086 0.069 Improved Residential
4-9-13-087 0.113 Improved Residential
4-9-13-088 0.113 Improved Residential
4-9-13-089 0.071 Improved Residential
4-9-13-090 0.069 Improved Residential
4-9-13-091 0.083 Improved Residential
4-9-13-092 0.143 Improved Residential
4-9-13-093 0.136 Improved Residential
4-9-13-094 0.145 Improved Residential
4-9-14-001 86.100 Imp Res/Ind/Ag/Unimp Res
4-9-14-006 0.709 Improved Residential
4-9-14-007 0.502 Improved Residential
4-9-14-009 25.982 Industrial
4-9-14-011 18.177 Conservation
4-9-14-012 0.313 Industrial
4-9-14-013 10.001 Industrial
4-9-14-016 1.024 Improved Residential
4-9-14-017 0.523 Industrial
4-9-14-018 7.673 Agricultural
4-9-15-001 0.544 Conservation
4-9-15-022 0.185 Improved Residential
4-9-15-041 0.210 Improved Residential
4-9-15-051 0.164 Improved Residential
4-9-15-052 0.210 Improved Residential
4-9-15-071 0.268 Improved Residential
4-9-15-072 0.215 Improved Residential
4-9-15-073 0.210 Improved Residential
4-9-15-077 0.203 Improved Residential
4-9-15-079 1.436 Conservation
4-9-16-001 0.124 Improved Residential
4-9-16-002 0.115 Improved Residential
4-9-16-006 0.115 Improved Residential
4-9-16-008 0.115 Improved Residential
4-9-16-009 0.115 Improved Residential
4-9-16-010 0.115 Improved Residential
4-9-16-011 0.115 Improved Residential
4-9-16-012 0.119 Improved Residential
4-9-16-013 0.120 Improved Residential
4-9-16-015 0.069 Improved Residential
4-9-16-033 0.115 Improved Residential
4-9-16-035 0.115 Improved Residential
4-9-16-036 0.115 Improved Residential
4-9-16-042 0.115 Improved Residential
4-9-16-044 0.115 Improved Residential
4-9-16-046 0.115 Improved Residential
4-9-16-101 0.115 Improved Residential
4-9-16-103 0.115 Improved Residential
4-9-16-126 0.116 Improved Residential
4-9-16-127 0.124 Improved Residential
4-9-16-146 0.049 Improved Residential
Page 5
TABLE 1 (CONTINUED)
SUMMARY OF LAND INVENTORY
CASTLE & COOKE, INC.'S LANAI PROPERTIES
Second Division Land Area Existing Assessment
Tax Map Key in Acres Use Classification
- - - - --------------- --------- -------------------
4-9-16-147 0.547 Improved Residential
4-9-16-148 0.739 Improved Residential
4-9-16-149 1.727 Improved Residential
4-9-19-005 0.153 Improved Residential
4-9-19-010 0.152 Improved Residential
4-9-19-031 0.151 Improved Residential
4-9-19-035 0.138 Improved Residential
4-9-19-036 0.138 Apartment
4-9-19-037 0.143 Improved Residential
4-9-19-041 0.142 Improved Residential
4-9-19-042 0.138 Improved Residential
4-9-19-046 0.138 Improved Residential
4-9-19-054 0.163 Improved Residential
4-9-19-055 0.157 Apartment
4-9-19-066 0.150 Improved Residential
4-9-19-068 0.154 Improved Residential
4-9-19-071 0.145 Improved Residential
4-9-19-073 0.138 Improved Residential
4-9-19-087 0.138 Improved Residential
4-9-19-095 0.150 Improved Residential
4-9-19-102 0.138 Improved Residential
4-9-19-121 5.409 Improved Residential
4-9-17-001 50.000 Hotel & Resort
4-9-17-002 94.999 Apt/Comm/Ind/Cons/Unimp Res
4-9-17-003 157.841 Comm/Cons/Unimp Res
4-9-17-004 0.207 Hotel & Resort
4-9-17-005 0.902 Hotel & Resort
4-9-17-007 5.749 Improved Residential
4-9-17-008 258.610 Cons/Unimp Res
4-9-17-009 170.722 Cons/Unimp Res
4-9-17-010 51.094 Cons/Unimp Res
4-9-22-001 0.906 Apartment
4-9-22-003(2) 2.953 Apartment
4-9-22-004(2) 1.458 Apartment
4-9-22-005 1.045 Improved Residential
4-9-22-006 0.968 Improved Residential
4-9-22-007 0.801 Improved Residential
4-9-22-010 0.602 Improved Residential
4-9-22-011 0.978 Improved Residential
4-9-22-012 0.915 Improved Residential
4-9-22-013 2.044 Improved Residential
4-9-22-014 3.562 Improved Residential
4-9-22-015 3.677 Improved Residential
4-9-22-016 0.888 Improved Residential
4-9-22-017 0.818 Improved Residential
4-9-22-018 0.843 Improved Residential
4-9-22-019 0.797 Improved Residential
4-9-22-020 0.750 Improved Residential
4-9-22-021 0.703 Improved Residential
4-9-22-022 0.944 Improved Residential
4-9-22-023 3.206 Unimproved Residential
4-9-22-024 0.564 Improved Residential
4-9-22-025 0.918 Improved Residential
4-9-23-001 4.309 Agricultural
4-9-23-002 0.844 Improved Residential
4-9-23-003 0.944 Improved Residential
4-9-23-004 1.199 Improved Residential
Page 6
TABLE 1 (CONTINUED)
SUMMARY OF LAND INVENTORY
CASTLE & COOKE, INC.'S LANAI PROPERTIES
Second Division Land Area Existing Assessment
Tax Map Key in Acres Use Classification
--------------- --------- -------------------
4-9-23-005 1.292 Improved Residential
4-9-23-006 0.659 Improved Residential
4-9-23-007 0.633 Improved Residential
4-9-23-008 0.585 Improved Residential
4-9-23-009 0.601 Improved Residential
4-9-23-010 0.563 Improved Residential
4-9-23-011 0.736 Improved Residential
4-9-23-014 1.174 Improved Residential
4-9-23-015 0.633 Improved Residential
4-9-23-016 0.638 Improved Residential
4-9-23-017 0.988 Improved Residential
4-9-23-018 1.498 Improved Residential
4-9-23-019 0.857 Improved Residential
4-9-23-020 1.354 Improved Residential
4-9-23-021 0.208 Improved Residential
4-9-23-022 9.700 Conservation
4-9-23-023 7.939 Improved Residential
4-9-23-024 0.626 Improved Residential
4-9-23-025 0.224 Improved Residential
4-9-18-001 24.829 Hotel & Resort
4-9-18-002 216.622 Impr Res/Cons/Unimp Res
4-9-18-003 326.512 Impr Res/Cons
4-9-20-002 0.486 Improved Residential
4-9-20-003 0.486 Improved Residential
4-9-20-004 0.463 Improved Residential
4-9-20-005 0.481 Improved Residential
4-9-20-006 0.485 Improved Residential
4-9-20-008 0.486 Improved Residential
4-9-20-010 0.582 Improved Residential
4-9-20-011 0.651 Improved Residential
4-9-20-012 0.684 Improved Residential
4-9-20-013 0.735 Improved Residential
4-9-20-014 0.681 Improved Residential
4-9-20-018 0.495 Improved Residential
4-9-20-019 0.484 Improved Residential
4-9-20-020 7.424 Improved Residential
4-9-21-001 1.514 Apartment
4-9-21-002 (2) 1.373 Apartment
4-9-21-003 3.384 Apartment
4-9-21-004 (2) 5.102 Apartment
4-9-21-005 3.571 Apartment
4-9-21-006 1.374 Apartment
4-9-21-007 2.233 Apartment
4-9-21-008 4.664 Unimproved Residential
4-9-21-009 11.827 Unimproved Residential
------------
Grand Total 87,827.183
- - - - -----------------------------
(1) Leased space at Airport
(2) Developed into Condominium Property Regime: some lots/
units have been sold.
Source: Castle & Cook, Inc. and The Hallstrom Group, Inc., May 2000.
Page 7
TABLE 2
SUMMARY OF LAND INVENTORY
CASTLE & COOKE, INC.'S SELECTED OAHU PROPERTIES
First Division Land Area County
Property Tax Map Key in Acres State Land Use Zoning
- - - - -------- -------------- --------- -------------- ------
Waipio Forest Reserve (1) 9-5-04-01 5,520,272 Cons. P-1
Whitmore (1) 7-1-02-09 24,092 Ag Ag-1
(1) 7-1-02-10 271,908 Ag Ag-1
---------
296,000
Mililani South (1) 9-4-03-02 231,754 Ag Ag-1
(1) 9-4-05-48 378,363 Ag Ag-1
---------
610,117
Waiawa (1) 9-4-06-10 34,940 Ag P-2
(1) 9-5-03-09 3,422 Ag P-2
(1) 9-4-06-29 302,080 Ag Ag-1
(1) 9-6-04-21 73,368 Ag Ag-1
(1) 9-4-06-03 (por) 2,767 Ag Ag-1
---------
416,577
Koa Ridge Makai (1) 9-4-06-01 438,363 Ag Ag-1
(1) 9-4-06-03 (por) 1,412 Ag Ag-1
(1) 9-4-06-02 92,785 Ag Ag-1
(1) 9-5-03-04 (por) 38,405 Ag Ag-1
---------
570,965
Pine Spur (1) 9-5-02-03 162,842 Ag Ag-1
Koa Ridge Mauka (1) 9-5-03-04 (por) 158,512 Ag Ag-1
(1) 9-5-03-04 (por) 183,416 Ag Ag-1
(1) 9-5-03-04 (por) 6,750 Ag Ag-1
(1) 9-5-03-04 (por) 136,638 Ag Ag-1
(1) 9-5-03-01 (por) 2,308 Ag Ag-1
(1) 9-5-03-01 (por) 34,800 Ag Ag-1
(1) 9-5-03-02 (por) 7,767 Ag Ag-1
(1) 9-5-03-01 (por) 110,000 Ag Ag-1
---------
640,191
Kipapa Gulch (1) 9-5-03-07 91,654 Ag Ag-1
(1) 9-5-03-01 (por) 256,319 Ag Ag-1
(1) 9-5-03-01 (por) 16,721 Ag Ag-1
(1) 9-5-03-01 (por) 625,082 Ag Ag-1
(1) 9-5-02-01 (por) 125,065 Ag Ag-1
(1) 9-5-49-31 13,682 Ag Ag-1
(1) 9-5-02-01 (por) Ag Ag-1
(1) 9-5-03-11 438,112 Ag Ag-1
(1) 9-5-03-14 (por) 12,497 Ag Ag-1
(1) 9-5-03-14 (por) 16,378 Ag Ag-1
---------
1,595,510
Dole Plantation (1) 6-4-03-08 6,974 Ag Ag-1
(1) 6-4-03-11 79,814 Ag Ag-1
(1) 6-4-04-07 163,212 Ag ---------
---------
250,000
Kaiahulu (1) 6-8-03-01 9,160 Ag Ag-1
- - - - -------------------------------
Source: Castle & Cooke Inc. and The Hallstrom Group, Inc., May 2000.